- Firms’ one-year inflation outlook slips to 4.84%, below 5% after four months
- CPI inflation expectation eases to 4.56% from 4.94%; uncertainty remains elevated
- Sales sentiment strengthens sharply as 43% of firms see normal-or-better levels
- Cost pressures stay sticky, but profit-margin expectations show signs of recovery
NE ECONOMIC BUREAU
AHMEDABAD, AUG 4
India’s corporate sector is beginning to see less inflation on the horizon and more resilience in demand, even as stubborn cost pressures continue to cloud the outlook. Business inflation expectations have fallen below the psychologically important 5% mark after four months, while improving sales and profit-margin expectations point to a gradual strengthening in business sentiment.
The latest Business Inflation Expectations Survey (BIES) conducted by the Misra Centre for Financial Markets and Economy at IIMA shows that firms’ one-year-ahead inflation expectations fell to 4.84% in June 2026, down sharply by 29 basis points from 5.13% in May.
The June 2026 round is the 110th round of the monthly BIES, which began in May 2017. The latest findings are based on responses from around 1,000 companies, primarily from the manufacturing sector.
Inflation expectations breach 5% barrier on the downside
The mean of firms’ individual probability distributions of expected unit-cost increases showed a further moderation in inflation expectations, with the one-year-ahead measure declining from 5.13% in May to 4.84% in June.
The sub-5% reading assumes significance as business inflation expectations had remained above that threshold for four consecutive months.
However, the improvement comes with a note of caution. Uncertainty surrounding business inflation expectations remained elevated at above 2% for the sixth consecutive month, indicating that companies continue to face considerable difficulty in gauging the future trajectory of costs.
Firms also lowered their one-year-ahead expectations for headline CPI inflation to 4.56% in June, compared with 4.94% in April—a decline of 38 basis points.
Yet uncertainty around CPI inflation remained elevated at above 1% throughout the February-June 2026 period.
Cost pressures refuse to disappear
The cost picture remains mixed, underlining the uneven nature of the disinflation process.
The proportion of companies reporting a “significant cost increase” in the 6%-10% range jumped sharply from 19% to 27% in June. At the same time, the share reporting a “very significant cost increase” of more than 10% declined from 27% to 20%.
Taken together, the proportion of firms perceiving costs as “up significantly” and above—more than 6%—remained around 46% for the third consecutive month.
The data suggest that while the intensity of extreme cost increases may be moderating, a substantial proportion of businesses continue to operate under elevated input-cost pressures.
Sales sentiment gets a decisive lift
The more encouraging signal comes from the demand side.
Business sales expectations improved noticeably in June, with around 43% of firms reporting “about normal” or better sales levels, sharply higher than the 35% recorded in May.
The eight-percentage-point improvement points to a strengthening in business activity and suggests that demand conditions may be providing companies with greater support despite continuing cost uncertainties.
Profit outlook shows signs of recovery
Profit-margin expectations also improved, adding another positive signal to the business outlook.
The proportion of firms expecting profit margins to remain “somewhat less than normal” or below declined to 73% in May 2026 from 78% in April.
Though the share remains high, the five-percentage-point improvement indicates that businesses are becoming somewhat more optimistic about profitability.
Overall, the BIES findings present a two-speed corporate picture: inflation expectations are cooling and sales sentiment is strengthening, while cost pressures and uncertainty remain significant constraints.
The combination of 4.84% business inflation expectations, 4.56% expected CPI inflation and a sharp rise in normal-or-better sales expectations nevertheless provides an encouraging signal that corporate India’s outlook is gradually shifting from inflation anxiety towards greater confidence in demand and profitability.
