One-year ahead inflation expectation of Indian firms falls below 5% after 17 months
As per the Business Inflation Expectations Survey (BIES) of IIM Ahmedabad, the one year ahead business inflation expectations in July 2022, as estimated from the mean of individual probability distribution of unit cost increase, have further declined by 34 basis points (bps) to 4.83% from 5.17% reported in the previous month.
“Business inflation expectations of Indian companies have dropped below 5% after 17 months,” IIM Ahmedabad said.
The uncertainty of business inflation expectations in July 2022, as captured by the square root of the average variance of the individual probability distribution of unit cost increase, has remained around 2%, which is the same as reported during February-June 2022, the institution said.
It added that the data on cost perceptions indicated easing of cost pressures. About 53% of firms that participated in the survey perceived significant (more than 6%) cost increase, down significantly from 65% reported in the earlier round of the survey.
The percentage of firms perceiving a more than 10% cost increase year-on-year (y-o-y) has further declined, to 24% in July from 36% in April.
In the monthly survey, the institute poses questions about the year-ahead cost expectations and factors influencing price changes, such as profit and sales levels. It also provides an indirect assessment of the overall demand condition of the economy, it added.