The Indian Institute of Management Ahmedabad conducted the 61st round of business inflation expectations survey (BIES) in order to predict the amount of slack in the economy by asking a panel of business leaders about their inflation expectations in the short and medium-term. Released on July 5, the BIES says “there are early signs of business inflation expectations tapering off, after remaining close to or above 6 percent during January – April 2022.”
According to the survey, the one-year inflation expectations of Indian companies fell sharply to 5.58 per cent in May, from 6.02 per cent in April. The survey is conducted monthly at the Misra Centre for Financial Markets and Economy at IIMA. The survey is unique as it asks around 1000 business leaders questions about year-ahead cost expectations and factors affecting changes in prices, profit, and sales levels. Most of the responses were received in the second half of June.
Inflation:
The report released on July 5 states that, “There are early signs of business inflation expectations tapering off, after remaining close to or above 6 percent during January – April 2022.”
Costs:
About the costs the report has found that there is persistence of high-cost pressures as over 66% of the participants perceive significant cost increase of 6 percent for the consecutive four months. The survey has seen a decline in the number of respondents perceiving cost increase of 10 percent.
Sales less than normal:
There is a sharp increase in the businesses’ reporting somewhat less than normal sales as 34 percent of them have stated in their response.
Much less than normal Profit:
For the past five consecutive rounds of the survey as many as ⅘ of the firms in the sample have reported ‘less than or somewhat less than normal’ profit. The report also points to the fact that profit expectations of firms have remained muted due to high cost increases and subdued sales expectations.
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