IIM-A survey shows gradual improvement in sales, but profit margins remain low

The Business Inflation Expectations Survey also predicted that expectations on sales will increase to 4.28 per cent by November this year, as against 3.87 per cent in October 2020.

A crowded market in Kolkata | Representational image: ANI

New Delhi: A survey conducted by the Indian Institute of Management-Ahmedabad (IIM-A) has found that expectations on sales have improved, with one-third of the 1,100 firms surveyed noting that business activity was at pre-Covid-19 levels of normal or above normal.

The Business Inflation Expectations Survey is a monthly report and the latest, for the month of November 2020, was released Tuesday. The survey also predicted that expectations on sales will increase to 4.28 per cent by November this year, as against 3.87 per cent in October 2020.

While 46 per cent firms in October 2020 had reported that sales were “much less than normal”, over 37 per cent companies noted the same in November, the report said.

“For the first time in the year 2020, about 1/3rd of the firms report that sales are normal or above normal,” the report said. By normal, the study referred to levels when compared to the average sales levels obtained in the preceding three years. It also noted that expectation on improved sales reflect better demand.

Increase in costs

Around one-third of the firms in this round of the survey also perceived a significant increase in costs (over 6 per cent) in 2020. About 17 per cent of the firms said costs have increased significantly (over 10 per cent).

Over 58 per cent of the firms said increase in costs was “3.1 per cent and above” in November 2020, as compared to the same time in 2019, and further up from 55 per cent in October 2020.

The survey also stated while sales have further improved, profit margins were adversely affected by increased costs. Over 47 per cent of the firms in November noted “much less than normal” profit — though it was up from 40 per cent in October 2020.

The BIES survey is aimed at providing ways to examine the amount of slack in an economy by polling a panel of business leaders about their inflation expectations in the short and medium terms.

In its 43rd round of survey in November, leaders of various firms were asked questions about year-ahead cost expectations and factors influencing price changes, such as profit, sales levels, etc. Companies are selected primarily from the manufacturing sector.