The Indian Institute of Management-Ahmedabad's (IIM-A's) Business Inflation Expectations Survey (BIES), which seeks 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, has said that high cost increase along with muted sales has severely affected industry profit margins in India.
Pointing towards hardening of cost pressures and subdued sales expectations, the BIES report says, around 70% of the firms perceived significant (over 6%) cost increase, as against 62% reported a month earlier.
Pointing out that firms’ sales expectations, the report, based on a survey of about a thousand top business executives, says, the firms reporting ‘much less than normal’ sales was at 36-37%, adding, over 59% of the reported that sales were ‘much or somewhat less than normal.”
As for profits, says the survey report, claiming to be unique “in that it goes straight to businesses -- the price setters -- rather than to consumers or households to understand their expectations of the price level changes”, over 52% of the firms in the sample reported ‘much less than normal’ profit – “only marginally down from 54% reported earlier”.
Noting that respondents were also asked to project one year ahead CPI headline inflation through an additional question using a probability distribution, the report adds, “The businesses expect one year ahead CPI headline inflation to be 5.74%, sharply up from 4.96% reported in December 2021.”
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