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IIM-A survey's 'disturbing' trend: Indian business' profits, sales expectations worsen

By Our Representative 

The Indian Institute of Management-Ahmedabad’s (IIM-A’s) Business Inflation Expectations Survey (BIES), which provides ways to examine the amount of slack in the economy by polling a panel of business leaders, has said that around 40% of the firms in January 2024 are reporting profit margins to be ‘about normal’ or greater – significantly down from 48% reported in December 2023. Overall, the profit margins expectations have notably deteriorated, it added.
A monthly survey, it asks questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels, etc. Conducted at the Misra Centre for Financial Markets and Economy, IIM-A, 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. 
The survey results come amidst Government of India data claiming the Indian economy grew sharply, by 8.4%, during the October-December quarter of the financial year 2023-24.
The profit expectations have sharply deteriorated even as the cost perceptions data in January 2024 “indicate moderations in cost pressures. The percentage of firms perceiving significant cost increase (over 6%) in January 2024 has declined to 31% from around 33% reported in December 2023. Further, the percentage of firms reporting moderate cost increase (3.1% to 6.0%) has also declined from 29% in December 2023 to 25% in January 2024.”
At the same time, however, the survey said, “About 18% of the firms are reporting ‘somewhat greater than normal’ sales in January 2024 – down from 23% reported in December 2023. About 43% of the firms are reporting ‘normal’ or greater sales in January 2024 – significantly down from 57% reported in December 2023”."Normal" means as compared to the average level obtained in the preceding 3 years, excluding the Covid-19 period.
BIES provides an indirect assessment of overall demand condition of the economy, says the survey report, adding, “Results of this survey are useful in understanding the inflation expectations of businesses and complement other macro data required for policy making. Companies are selected primarily from the manufacturing sector. These results are based on the responses of around 1000 companies.”

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