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Indian firms' costs up, profits 'remain muted' despite improvement in sales: IIM-A survey

By A Representative 
The Indian Institute of Management-Ahmedabad's (IIM-A's) Business Inflation Expectations Survey (BIES), which claims to provide ways to examine the amount of slack in the economy by polling a panel of business leaders across India, has said that the cost perceptions data indicates “increase of cost pressures”.
It says, “Around 42% of the participating firms in the survey perceive significant (over 6%) cost increase, up from 37% reported in the earlier round of the survey. The percentage of firms perceiving over 10% cost increase y-o-y has increased sharply. Over 18% of the firms in perceive that costs have increased very significantly (over 10%) – up from 12% recorded” in the previous survey.
Calling the survey unique in that it goes straight to businesses -- the price setters -- rather than to consumers or households, to understand their expectations, BIES selects companies primarily from the manufacturing sector. The latest results are based on the responses of around 1,000 companies.
Stating that the profit margins expectations of companies have “remained muted” BIES said, over 37% of the participating firms “perceive profit margins are ‘somewhat less than normal’ – up from 33% reported in December 2022”.
All this has happened ironically at a time when, BIES says, firms’ sales expectations have improved. “Over 45% of the firms in this round of the survey report normal or above normal sales. Percentage of firms reporting ‘somewhat greater than normal’ sales has increased to 20% in from 16% reported in the earlier survey.
Further, the survey says, “One year ahead business inflation expectations, as estimated from the mean of individual probability distribution of unit cost increase, have sharply increased by 60 basis points to 4.79% in January 2023, from 4.19% reported in December 2022.” 
“The uncertainty of business inflation expectations, as captured by the square root of the average variance of the individual probability distribution of unit cost increase, has increased sharply to 2.28%, from around 2% reported during September-December 2022”, it adds

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