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Cost perception of India's business executives still presents 'mixed-signal': IIM-A survey

By Our Representative

The Indian Institute of Management-Ahmedabad’s (IIM-A’s) latest Business Inflation Expectations Survey (BIES), which seeks to examine the amount of slack in the economy by polling a panel of business leaders, has said that that “the cost perception” of those surveyed “presents a mixed-signal”, with around one-third of the firms still perceiving “significant cost increase.”
Stating that while expectations on sales have improved, plausibly reflecting improved demand conditions during the festival season, BIES in its 42nd round of survey, a monthly exercise, said, “Firms’ profit margin expectations have steadily moved from ‘much less than normal’ profit to ‘somewhat less than normal’ and ‘about normal’ profit category.”
According to BIES, “The cost perceptions data presents a mixed signal. About one-fourth of the firms in this round of the survey perceive that cost increase has been less than 1% as compared with the same time last year. At the same time, around one-third of the firms still perceive significant (over 6%) cost increase.”
It added, “Around 55% of the firms find that the current cost increase is ‘3.1% and above’ as compared to the same time last year – marginally up from 54% reported in September 2020 . This is primarily driven by the firms indicating moderate cost increase (between 3.1% and 6%).”
The BIES further said, “Expectations on sales have further improved – reflecting improved demand during the festival season. Over 46% of the firms in October 2020 report that sales are ‘much less than normal’ as against 51% firms reporting in September 2020. This proportion is gradually declining from March 2020 .”
At the same time, it added, “Over 40% of firms in the sample in October 2020 report ‘much less than normal’ profit as against 54% in September 2020. Firms’ profit margin expectations have steadily moved from ‘much less than normal’ profit to ‘somewhat less than normal’ and ‘about normal’ profit category.”

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