India's business executives regret further hardening of cost pressure, impacting profit

Costs per unit compare with this time last year: % responses

By Our Representative
The Indian Institute of Management-Ahmedabad’s (IIM-A's) latest Business Inflation Expectations Survey (BIES) report, which seeks to provide ways to examine the amount of slack in the economy by polling business leaders from around 1,100 companies, has said that there was “further hardening of cost pressures”, with over 40% of the firms in December 2020 perceiving “significant (over 6%) cost increase – up from 30% reported in November 2020.”
Stating that about 18% of the firms perceive that costs have increased very significantly (over 10%), the report says, “Over 63% of the firms find that the current cost increase is ‘3.1% and above’ as compared to the same time last year – further up from 58% reported in November 2020.”
The report says, “Expectations on sales have remained unchanged – reflecting stable demand conditions. Over 37% of the firms in December 2020 report that sales are ‘much less than normal’. "Normal" means as compared to the average level obtained in the preceding three years. However, “for the first time in the year 2020, over 35% of the firms report that sales are normal or above normal”, the report adds.

Profit margins: % response

Pointing out that, overall, the profit margin has remained unchanged due to increased cost concerns, the report says, “Over 41% of firms in the sample in December 2020 report ‘much less than normal’ profit – down from 47% reported in November 2020.”. It adds, “Firms’ expectations of ‘about normal’ or greater profit margin have remained unchanged.”