Insignificant increase in costs; sales, profits improve: IIM-A surveys Indian business

By Our Representative
In its fresh Business Inflation Expectations Survey (BIES), an Indian Institute of Management-Ahmedabad (IIM-A) report has said that cost perceptions data in October 2023 “does not indicate any significant increase in cost pressures.”
BIES claims 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. A monthly survey, it asks questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels, etc.
Calling the survey 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, BIES report says, “One major advantage of BIES is that one can get a probabilistic assessment of inflation expectations and thus get a measure of uncertainty. It also provides an indirect assessment of overall demand condition of the economy.”

Based on results are based on the responses of around 1,200 companies, it adds, “Results of this Survey are, therefore, useful in understanding the inflation expectations of businesses and complement other macro data required for policy making.”
“The percentage of firms perceiving significant cost increase (over 6%) has declined from 32% in September 2023 to 29% in October 2023. Around one-third of the firms is reporting moderate cost increase (3.1% to 6.0%)”, the survey says.
It notes, “About 23% of the firms are reporting ‘somewhat greater than normal’ sales in October 2023 – up significantly from 17% reported in September 2023”, adding, “Almost 50% of the firms are reporting ‘normal’ or greater sales in October 2023 from 45% in September 2023.”

At the same time, it says, “Around 44% of the firms in October 2023 are reporting profit margins to be ‘about normal’ or greater, as compared to 36% reported in September 2023, adding, “Overall, the profit margins expectations have improved significantly.”
According to the survey, “One year ahead business inflation expectation, as estimated from the mean of individual probability distribution of unit cost increase, has again increased marginally to 4.44% in October 2023, from 4.39% reported in September 2023. Average inflation expectation of the firms remained anchored around 4.3% for the past six consecutive months.”
“The uncertainty of business inflation expectations in October 2023, as captured by the square root of the average variance of the individual probability distribution of unit cost increase, has declined to 1.9% from 2.1% reported in September 2023”, the survey states.

“Businesses in October 2023 expect one year ahead CPI headline inflation to be 4.73%, down by 27 basis points from 5.00% reported in August 2023”, it adds.

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