High cost pressure on business continues, sale, profit level improve a bit: IIM-A survey

By A Representative
The new Business Inflation Expectations Survey (BIES) report, released by the Indian Institute of Management-Ahmedabad (IIM-A) for June, has said that while one year ahead business inflation expectations in June 2021 have declined by 16 basis points to 5.27% from 5.43% reported in May 2021, one year ahead consumer price index (CPI) inflation expectations “have increased sharply to 5.36%, further up from 4.73% reported in April 2021.”
At the same time, says the report, the cost perceptions data indicates “sustained higher cost pressures”, with over 28% of the firms still perceiving that costs have increased very significantly (over 10%), though adding, the severe adverse impact of the second wave of Covid-19 is “gradually waning and sales expectations have moved back to the March 2021 level.”
At the same time, the BIES report, which seek to provide ways to examine the amount of slack in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term, says, profit expectations have somewhat improved. In the June 2021 round the responses were received from of around 1100 companies.
The report says, “The cost perceptions data indicates sustained high cost pressures. Over 53% of the firms in this round of the survey perceive significant (over 6%) cost increase – marginally down from 56% reported in May 2021. Note that about 28% of the firms still perceive that costs have increased very significantly (over 10%).” It adds, “Over 72% of the firms in June 2021 find that the current cost increase is ‘3.1% and above’ as compared to 61% reported in March 2021.”

Pointing out that “severe adverse impact of the second wave of Covid-19 on sales expectations is gradually waning”, the report says, “Over 46% of the firms in June 2021 report that sales are ‘much less than normal’ – further improvement as compared to the sentiment reported in May 2021”. By normal it means “as compared to average level obtained in the preceding three years.
As for the profits, the report says, “Over 50% of the firms in the sample in June 2021 report ‘much less than normal’ profit – sharply down from 60% reported in May 2021”, adding, one can “note that the change in profit expectations is primarily due to the shift of responses from ‘much less than normal’ to ‘somewhat less than normal’ category.”

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