54% of firms report ‘less than normal’ or lower sales, subdued profit margins: IIM-A survey

By A Representative

The high profile Business Inflation Expectations Survey (BIES) of the Indian Institute of Management-Ahmdabad (IIM-A) has revealed that About 54% of the firms are still reporting ‘somewhat less than normal’ or lower sales, even as pointing out that overall, the profit margins expectations have remained subdued.

Based on responses of around 1,100 companies, the BIES provides 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.

Questions asked include year-ahead cost expectations and the factors influencing price changes, such as cost, profit, sales levels, etc. "The survey is 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", states an IIM-A note.

It claims, "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. Results of this survey are, therefore, useful in understanding the inflation expectations of businesses and complement other macro data required for policy making."

Conducted at the Misra Centre for Financial Markets and Economy, IIM-A,

the survey finds that, overall, "the cost perceptions data in May 2024 indicate moderation in cost pressures, although the percentage of firms perceiving very significant cost increase (over 10%) in May 2024 has increased marginally to 14%, from around 13% reported in April 2024."

IIM-A note says, "The percentage of firms reporting moderate to significant cost increase (3.1% to 10.0%) has declined significantly to 41% in May 2024, from 47% reported in April 2024."

It points out, "The sales expectations scenario during February-May 2024 remained similar. Only around 18-19% of the firms are reporting ‘somewhat greater than normal’ sales. About 54% of the firms are still reporting ‘somewhat less than normal’ or lower sales during March-May 2024."

Normal means as compared to the average level obtained in the preceding 3 years, excluding the Covid-19 period.

The survey also reveals that "around 41% of the firms in May 2024 are reporting profit margins to be ‘about normal’ or greater – down from 48% reported in April 2024", underlining, "Overall, the profit margins expectations remained subdued in May 2024."

The survey also finds that one year ahead business inflation expectation has "declined by 25 basis points to 4.59% in May 2024 from 4.84% reported in April 2024. Firms’ average inflation expectation during the past 12 months works out to be 4.35%."

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