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Greater number of firms expect increase in costs, as sales, profits improve: IIM-A survey

By Our Representative 

The Indian Institute of Management-Ahmedabad’s (IIM-A’s) Business Inflation Expectations Survey (BIES) has suggested that a greater number of firms are expecting increase in cost pressures. However, according to the survey, the sales and profit expectations of the have improved “significantly.”
BIES claims to provide ways to examine the amount of slack in the economy by polling a panel of business leaders about their cost expectations and the factors influencing price changes, such as profit, sales levels, etc. The survey is claimed 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.
“Results of this Survey are useful in understanding the inflation expectations of businesses and complement other macro data required for policy making”, the survey report, prepared by the Misra Centre for Financial Markets and Economy, IIM-A, based on the responses of around 1000 companies, says.
“The cost perceptions data indicate increase in cost pressures”, the report says, noting, “The percentage of firms perceiving significant cost increase (over 6%) in December 2023 has increased to 33% from around 29% reported during October-November 2023. However, the percentage of firms reporting moderate cost increase (3.1% to 6.0%) has remained around 29% in December 2023.”
The survey further reveals that about 23% of the firms are reporting ‘somewhat greater than normal’ sales in December 2023 -– up from 19% reported in November 2023. “About 57% of the firms are reporting ‘normal’ or greater sales in December 2023 – significantly up from 46% reported in November 2023. 'Normal' means as compared to the average level obtained in the preceding 3 years, excluding the Covid-19 period.”
As for profit margins, the survey states, “Around 48% of the firms in December 2023 are reporting profit margins to be ‘about normal’ or greater – significantly up from 43% reported in November 2023”, noting, “Overall, the profit margins expectations have notably improved.”

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