-NE
- IIMA’s Misra Centre BIES finds corporate cost pressures softening; fewer firms report high input cost rise
- Profit margins, however, remain subdued as nearly three-fourths of firms expect lower-than-normal earnings
NE ECONOMIC BUREAU
AHMEDABAD, NOV 8
India’s business inflation expectations eased markedly in September 2025, signalling a potential cooling of corporate cost pressures, according to the latest Business Inflation Expectations Survey (BIES) conducted by the Misra Centre for Financial Markets and Economy at the Indian Institute of Management Ahmedabad (IIMA).
The one-year-ahead business inflation expectation, derived from the mean of the individual probability distribution of unit cost increases, fell by 66 basis points to 3.79% in September from 4.45% in August 2025. Over the past twelve months, firms’ inflation expectations have remained largely anchored around 4.19%, the report noted.
However, the uncertainty in business inflation expectations — measured through the square root of the average variance of unit cost increase distributions — rose marginally to 1.90% from 1.85% in the previous month.
Cost Pressures Easing
The survey pointed to visible signs of moderation in cost pressures. The percentage of firms reporting significant or very significant cost increases (above 6%) declined to 25% in September, compared to 31% in August 2025.
“These trends suggest a broad-based easing in input cost stress, aligning with recent moderation in wholesale inflation,” the report indicated.
Sales Levels Still Below Normal
Despite cost relief, sales recovery remains uneven, the BIES found. During June–September 2025, over 60% of the firms reported sales levels as “much less than normal” or “somewhat less than normal.”
Nonetheless, the share of firms reporting “about normal” or higher sales inched up to 38% in September, from 36% in August, hinting at a gradual demand stabilisation.
Profit Margins Under Pressure
Corporate profitability continues to lag. The survey revealed that 74% of firms perceived their profit margins as “somewhat less than normal” or lower in September.
Alarmingly, the share of firms reporting ‘about normal’ or higher profit margins plunged to 26%, from nearly 39% in July–August 2025, reflecting persistent strain on earnings even as cost conditions improve.
Outlook
The Business Inflation Expectations Survey (BIES), conducted monthly by IIMA’s Misra Centre, captures the evolving cost perceptions and inflation expectations of businesses across India. The September round underscores a welcome dip in inflation expectations, yet highlights the dual challenge of sluggish demand and margin compression that many firms continue to face.
