HYDERABAD: Despite confidence exuded by the Reserve Bank of India about taming inflation, businesses expect a continued rise in consumer and business inflation, a survey conducted IIM-Ahmedabad revealed.
“The one-year-ahead business inflation expectation in August 2022 has increased by 26 basis points to 5.09 per cent from 4.83 per cent reported in July 2022. The declining momentum of business inflation expectations seen after March 2022 has reversed in August 2022,” said IIM Ahmedabad citing the Business Inflation Expectations Survey (BIES).
The report was prepared based on a survey of 900 companies from the manufacturing sector. The survey involves questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels, etc.
The uncertainty of business inflation expectations, however, has declined marginally to 1.99 per cent in August 2022.
The cost perceptions data gleaned from the survey indicates the re-emergence of cost pressures, which lead to increase in price. “Around 59 per cent of the participating firms in the survey perceive a significant (over 6 per cent) cost increase, up from 53 per cent reported in the earlier round of the survey,” the report said.
“The percentage of firms perceiving over 10 per cent cost increase y-o-y has also increased. Over 26 per cent of the firms in August 2022 round of the survey perceive that costs have increased very significantly (over 10 per cent) — marginally up from 24 per cent recorded in July 2022,” the survey said.
“The expectations of the companies on sales have sharply declined. “Percentage of companies reporting ‘somewhat less than normal’ sales has increased to 32 per cent in August 2022 from 26 per cent reported in July 2022. Around 19 per cent of the firms in August 2022 report that sales are ‘about normal’, sharply down from 25 reported in July 2022,” the survey revealed.
The survey also indicates that the companies are expecting lower profit margins. “Over 36 per cent of the participating firms in the survey perceive profit margins are ‘somewhat less than normal’, which is sharply up from 23 per cent reported in the earlier round of the survey,” the survey said.
