Summary
The BIES questionnaire is based on the feedback from the industry, academicians and policy makers
The monthly survey asks questions about year-ahead cost expectations and factors affecting changes in price, like profit, sales levels, etc
The Indian Institute of Management Ahmedabad conducted a business inflation expectations survey (BIES) recently in order to predict the amount of slack in the economy by asking a panel of business leaders about their inflation expectations in the short and medium term. The monthly survey asks questions about year-ahead cost expectations and factors affecting changes in prices, profit, sales levels, etc.
IIM Ahmedabad claims the survey to be unique as it goes straight to the price setters rather than to consumers or households, for understanding their expectations of the price level changes. One primary advantage of BIES is that a probabilistic assessment of inflation expectations can be achieved and thus a measure of uncertainty can be attained. It also offers an indirect analysis of the overall demand condition of the economy.
The results of this survey are important in understanding the inflation expectations of businesses and complement other macro data needed for policy making.
The BIES was started at IIMA in May 2017, and the questionnaire is prepared on the basis of the detailed feedback received from the industry, academicians and policy makers.
The companies are chosen from the manufacturing sector. “BIES – October 2021” is the 54th round of the survey. The results are based on the responses of about 1,200 companies.
One year ahead, business inflation expectations in October 2021 have declined by 28 basis points to 5.47% from 5.75% reported in September 2021. It is estimated from the mean of individual probability distribution of unit cost increase. The uncertainty of business inflation expectations in October 2021 has remained elevated at 2.2%. It is captured by the square root of the average variance of the individual probability distribution of unit cost increase.
Survey responses show an increase in one year ahead CPI headline inflation expectation. The businesses in October 2021 expect one year ahead CPI headline inflation to be around 5.06%, which is marginally up from 4.98% that was reported in August 2021, with a relatively low standard deviation of 1.02%. It has remained above 5% since June 2021.
The number of firms perceiving significant cost increases (over 6%) has been the same around 59% in the last two rounds of the survey.
Last updated on 07 Dec 2021
