High costs offset sales, mute profits: IIM-A report amidst GoI's high GDP growth claim

By A Representative
The latest round of Business Inflation Expectations Survey (BIES) of the Indian Institute of Management-Ahmedabad (IIM-A), which seeks to provide ways to examine the amount of slack in the economy by polling a panel of India's business leaders, has said, "Improved sales expectations are offset by high cost increases. As a result, profit expectations remain muted."
Conducted each month by the Misra Centre for Financial Markets and Economy, IIM-A, by polling responses from around 1,000 companies, the survey results have been released amidst the Ministry of Statistics and Programme Implementation, Government of India (GoI) claiming that Gross Domestic Product in 2021-22 grew by a whopping 8.7%, and the Reserve Bank of India (RBI) predicting that the economy would grow at 7.2% in 2022-23.

The BIES report said, "The cost perceptions data indicates persistence of high cost pressures. Over 66% of the participating firms in the survey perceive significant (over 6%) cost increase for the consecutive three months." It added, "Over 36% of the firms in April 2022 round of the survey perceive that costs have increased very significantly (over 10%). For the consecutive four rounds, over 36% of the firms reported more than 10% cost increase."
This happened every as the "firms’ sales expectations in April 2022 have further improved. Percentage of firms reporting ‘much less than normal’ sales has marginally declined. Notably around 28% -- highest in the last 5 years -- of the firms in April 2022 report that sales are ‘about normal’,", the report said.

And yet, as cost pressure remained high, the report asserted, "For the past 4 consecutive rounds, over 77% of the firms in the sample are reporting ‘much less than or somewhat less than normal’ profit."
The report further said, "The business inflation expectations remained above 6% for the third consecutive month.The uncertainty of business inflation expectations in April 2022 has remained around 2.1%, same as reported during February-March 2022." It added, "The businesses in April 2022 expect one year ahead CPI headline inflation to be 5.90%, further up from 5.74% reported in February 2022."

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