More than 80% business executives say sales, profits post-lockdown remain dormant

Costs per unit compared to this time last year (% responses)

By A Representative

The Indian Institute of Management-Ahmedabad’s (IIM-A’s) latest Business Inflation Expectations Survey (BIES), seeking to examine the extent of slack in the economy by polling a panel of business leaders, has said that around 28% of the firms still expect significant (over 6%) cost increase as compared to the same time last year, though this proportion has been gradually declining after March 2020.
Details of the survey also suggest that, post-initial lockdown phases, while there seems to be steady improvement in sales, around 82% of the firms in the sample still report that sales are ‘somewhat or much less than normal’, even as pointing out that this proportion was over 93% in March 2020, when the lockdown was imposed by Prime Minister Narendra Modi. It adds, similar sentiments are expressed for profit margin. Firms are moving from ‘much less than normal’ profit to ‘somewhat less than normal’ profit category gradually.

Sales level (% response)

Carried out in August BIES, a monthly exercise, says that cost perceptions data shows “marginal increase of cost pressures”, pointing out, “Around 52% of the firms now believe that the current cost increase is 3.1% and above as compared to the same time last year – marginally down from 53% reported in July 2020.”
It continues, “Over 59% of the firms in August 2020 report that sales are ‘much less than normal’ as against 66% firms reporting in July. This proportion is gradually declining from March 2020.” It adds, “While there seems to be steady improvement of sales, around 82% of the firms in the sample still report that sales are ‘somewhat or much less than normal’ (Chart 4). This proportion was over 93% in March 2020.”

Profit margins (% response)

At the same time, BIES, which has been conceptualised by IIM-A faculty Prof Amitabh Das, says, “Over 57% of firms in the sample in August 2020 reported ‘much less than normal’ profit as against 62% in July 2020. Firms are moving from ‘much less than normal’ profit to ‘somewhat less than normal’ profit category gradually.” So far, the team under Prof Das has carried out 40 surveys since May 2017, every month almost without break.