- Inflation Outlook Firms Up: One-year-ahead business inflation expectation climbs to 4.16% in November 2025
- Costs Cloud Confidence: More firms report over 3% rise in unit costs, uncertainty spikes
- Sales Mixed, Margins Squeezed: Sales sentiment improves modestly, but profit expectations slip
NE BUSINESS BUREAU
AHMEDABAD, JAN 13
India’s business sentiment on inflation has turned more cautious, with firms expecting higher prices and greater uncertainty ahead, according to the Business Inflation Expectations Survey (BIES) – November 2025, conducted monthly by the Misra Centre for Financial Markets and Economy, IIM Ahmedabad (IIMA).
The survey indicates a further uptick in one-year-ahead inflation expectations, alongside rising cost pressures and narrowing profit margins, even as sales sentiment shows early signs of stabilisation.
Inflation Expectations: Upward Drift Continues
The one-year-ahead business inflation expectation, estimated from the mean of individual probability distributions of unit cost increases, rose by 19 basis points to 4.16% in November 2025, compared with 3.97% in October 2025. Over the past 12 months, firms’ average inflation expectations have remained largely anchored around 4.14%, suggesting persistence in inflationary outlook.
However, the uncertainty surrounding inflation expectations increased sharply. The dispersion measure—captured by the square root of the average variance of individual probability distributions—climbed to 2.10% in November from 1.90% in October, reflecting heightened apprehension among businesses about future cost trajectories.
Costs: Moderate but Broad-Based Pressure
Cost perceptions in November 2025 point to a moderate but widening increase in cost pressures. The share of firms reporting above 3% rise in current costs per unit increased to 53%, up from 49% in October 2025. This rise underscores the continued strain on input costs across sectors.
Sales Levels: Early Signs of Improvement
On the demand side, business sentiment shows tentative improvement. About 56% of firms reported sales as ‘much less than normal’ or ‘somewhat less than normal’ in November 2025, down from 60% during September–October 2025.
Correspondingly, the proportion of firms indicating ‘about normal’ or higher sales levels improved to 44%, compared with around 38% in the preceding two months, suggesting a gradual stabilisation in market conditions.
Profit Margins: Under Pressure
Despite marginal improvement in sales, profit margins remain under stress. The share of firms reporting ‘about normal’ or higher profit expectations declined to 33% in November 2025, from 37% in October. Rising cost pressures emerged as the key factor weighing on margin outlook.
Survey Framework
The Business Inflation Expectations Survey (BIES) assesses current business conditions, costs, sales, profit margins, and forward-looking unit cost expectations over the next 12 months. Responses are benchmarked against firms’ perception of “normal” levels, defined as the average corresponding period over the preceding three years, excluding the Covid-19 phase.
Overall, the November 2025 BIES highlights a business environment marked by firm inflation expectations, increasing uncertainty, and cost-led margin compression, even as demand conditions show cautious signs of recovery.
