Business inflation expectations decline, but concerns persist over sales, profitability: IIM-A Survey

By A Representative 

Business inflation expectations continued to ease in February 2025, according to the latest round of the Business Inflation Expectations Survey (BIES) od the Indian Institute of Management-Ahmedabad.The one-year ahead inflation expectation, based on the mean probability distribution of unit cost increase, dropped by 18 basis points to 4.06%, down from 4.24% in January.

Uncertainty around these expectations ticked up slightly, with the standard deviation rising to 1.84% from 1.81% in previous rounds.

In a supplementary question, firms projected one-year ahead CPI headline inflation at 4.24%, a sharp decline from 4.96% in December 2024. Uncertainty in CPI projections remained low, at around 0.90%.

The survey also reflected easing cost pressures. The share of firms reporting significant cost increases (over 6%) fell to 25% in February, compared to 30% in January. Moderate cost increase reports (3.1%–6%) also declined to 26% from 32%.

However, concerns persisted over sales and profitability. About 32% of firms reported sales ‘much less than normal’—up from 23% in January. Similarly, around 69% of firms reported ‘somewhat less than normal’ or lower profit margins, up from 63%.

The BIES provides critical insights into firms’ inflation expectations and cost perceptions, aiding in the formulation of monetary policy.