About
The Business Inflation Expectations Survey (BIES) provides ways to examine the amount of slack in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term.
The survey asks questions about year-ahead cost expectations and factors influencing price changes, such as profit, sales levels, etc. The survey is unique in that it goes straight to businesses, the price setters, rather than to consumers or households, to understand their expectations of the price level changes. One major advantage of BIES is that one can get a probabilistic assessment of inflation expectations and thus a measure of uncertainty. It also provides an indirect assessment of overall demand condition of the economy. Results of this will thus be useful in understanding the inflation expectation of business and complement other macro data required for policy making.
Frequently Asked Questions
What is the purpose of the survey?
Inflation expectations are one of the main drivers of current inflation, because expected inflation influences current wage negotiations, price setting, financial contracting for investment and consumption. These are also used to generate inflation forecasts. If economic agents view the central bank as credible, inflation expectations are more likely to be well anchored, further enhancing the effectiveness of monetary policy. Also better anchored inflation expectations lead to lower inflation persistence. Because of this link, central banks can affect current and future inflation by better anchoring agents' expectations of long-term inflation. Therefore, understanding inflation expectations are critical for achieving price stability. But our understanding of inflation expectations is limited. This is partly due to measurement issues as they are not directly observed. That is why Bernanke (2007) called for more emphasis on incorporating learning and imperfect information in the modelling of inflation and of inflation expectations. While understanding inflation expectation of household is important, it is also imperative to capture expectations of firms and business owners. Since business representatives participate directly in setting prices and wages, more insight into the inflation expectations of price setters over different time horizons would be helpful for policy-makers. Availability of this data has enormous potential for research and macroeconomic policy making, particularly for monetary policy. This has gained further importance as the Reserve Bank of India (RBI) has formally moved to inflation targeting. This data will be valuable for firms/companies for setting their own business goals as well.
How is the survey conducted?
Each month, during the second week, panelists receive an e-mail with a secure link to the online survey. The survey is open till the third week of the month.
Who participates in the survey?
Companies are selected based on certain sampling criteria from the list of companies as available with the Ministry of Corporate Affairs (MCA). Approximately 5000 panelists receive the survey each month. Panelists represent businesses from various sectors like manufacturing, wholesale and retail trade, suppliers, transport, construction, etc. The size composition of the panel roughly reflects 39% small, 37% medium and 24% large businesses.
Latest Report
Business Inflation Expectations Survey (BIES) 1 – December 2023
A. Inflation expectations
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One year ahead business inflation expectation, as estimated from the mean of individual probability distribution of unit cost increase, has increased significantly by 54 basis points to 4.58% in December 2023 from 4.04% reported in November 2023. Average inflation expectation of the firms for the past six consecutive months works out to be around 4.3%. The trajectory of one year ahead business inflation expectations is presented in Chart 1.
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The uncertainty of business inflation expectations in December 2023, as captured by the square root of the average variance of the individual probability distribution of unit cost increase, declined sharply to 1.88% from 2.0% reported in November 2023.
Chart 1: One year ahead business inflation expectations (%)
- Respondents were also asked to project one year ahead CPI headline inflation through an additional question using a probability distribution. This question is repeated every alternate month, coinciding with the month of RBI’s bi-monthly monetary policy announcement.
1 The Business Inflation Expectations Survey (BIES) provides ways to examine the amount of slack in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term. This monthly survey asks questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels, etc. The survey is unique in that it goes straight to businesses - the price setters - rather than to consumers or households, to understand their expectations of the price level changes. One major advantage of BIES is that one can get a probabilistic assessment of inflation expectations and thus get a measure of uncertainty. It also provides an indirect assessment of overall demand condition of the economy. Results of this Survey are, therefore, useful in understanding the inflation expectations of businesses and complement other macro data required for policy making. With this objective, the BIES is conducted monthly at the Misra Centre for Financial Markets and Economy, IIMA. A copy of the questionnaire is annexed. Companies are selected primarily from the manufacturing sector. Starting in May 2017, the “BIES – December 2023” is the 80 th round of the Survey. These results are based on the responses of around 1000 companies.
Companies are selected primarily from the manufacturing sector. Starting in May 2017, the “BIES – December 2023” is the 80 th round of the Survey. These results are based on the responses of around 1000 companies.
- Businesses in December 2023 expect one year ahead CPI headline inflation to be 4.96%, up by 23 basis points from 4.73% reported in October 2023, with a relatively low standard deviation of 0.88% (Chart 2).
Chart 2: Expected CPI headline inflation (%) - one year ahead
B. Costs
- The cost perceptions data in December 2023 indicate increase in cost pressures.
- The percentage of firms perceiving significant cost increase (over 6%) in December 2023 has increased to 33% from around 29% reported during October-November 2023 (Chart 3). However, the percentage of firms reporting moderate cost increase (3.1% to 6.0%) has remained around 29% in December 2023.
Chart 3: How do current costs per unit compare with this time last year? – % responses
C. Sales Levels
- About 23% of the firms are reporting ‘somewhat greater than normal’ sales in December 2023 – up from 19% reported in November 2023 (Chart 4).
- About 57% of the firms are reporting ‘normal’ or greater sales in December 2023 – significantly up from 46% reported in November 2023 2 .
Chart 4: Sales Levels - % response
D. Profit Margins
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Around 48% of the firms in December 2023 are reporting profit margins to be ‘about normal’ or greater – significantly up from 43% reported in November 2023 (Chart 5).
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Overall, the profit margins expectations have notably improved.
Chart 5: Profit Margins - % response
2 "Normal" means as compared to the average level obtained in the preceding 3 years, excluding the Covid-19 period.
Business Inflation Expectation Survey (BIES) – Questionnaire
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A. Current Business Conditions Q1. How do your current PROFIT MARGINS@ compare with "normal"* times? Q2. How do your current sales levels compare with SALES LEVELS@ during what you consider to be "normal"* times? @ of the main or most important product in terms of sales. |
| B. Current Costs Per Unit^ Q3. Looking back, how do your current COSTS PER UNIT^ compare with this time last year? o Down (< -1%) o About unchanged (-1% to 1%) o Up somewhat (1.1% to 3%) o Up moderately (3.1% to 6%) o Up significantly (6.1% to 10%) o Up very significantly (> 10%) ' of the main or most important product in terms of sales. |
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C. Forward Looking Costs Per Unit$ o Unit costs down (less than -1%) $ of the main or most important product in terms of sales. |
Latest Report
Business Inflation Expectations Survey (BIES) 1 – February 2024
A. Inflation expectations
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One year ahead business inflation expectation, as estimated from the mean of individual probability distribution of unit cost increase, has increased marginally by 9 basis points to 4.46% in February 2024 from 4.37% reported in January 2024. Average inflation expectation of the firms for the past twelve months works out to be around 4.3%. The trajectory of one year ahead business inflation expectations is presented in Chart 1.
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The uncertainty of business inflation expectations in February 2024 as captured by the square root of the average variance of the individual probability distribution of unit cost increase, remained high around 2% during January-February 2024.
Chart 1: One year ahead business inflation expectations (%)
- Respondents were also asked to project one year ahead CPI headline inflation through an additional question using a probability distribution. This question is repeated every alternate month, coinciding with the month of RBI’s bi-monthly monetary policy announcement.
The Business Inflation Expectations Survey (BIES) provides ways to examine the amount of slack in the economy by polling a panel of business leaders about their inflation expectations in the short and medium term. This monthly survey asks questions about year-ahead cost expectations and the factors influencing price changes, such as profit, sales levels, etc. The survey is unique in that it goes straight to businesses - the price setters - rather than to consumers or households, to understand their expectations of the price level changes. One major advantage of BIES is that one can get a probabilistic assessment of inflation expectations and thus get a measure of uncertainty. It also provides an indirect assessment of overall demand condition of the economy. Results of this Survey are, therefore, useful in understanding the inflation expectations of businesses and complement other macro data required for policy making. With this objective, the BIES is conducted monthly at the Misra Centre for Financial Markets and Economy, IIMA. A copy of the questionnaire is annexed.
Companies are selected primarily from the manufacturing sector. Starting in May 2017, the “BIES – January 2024” is the 82 nd round of the Survey. These results are based on the responses of around 1000 companies.
- Businesses in February 2024 expect one year ahead CPI headline inflation to be 4.77%, down by 19 basis points from 4.96% reported in December 2023 (Chart 2). However, their uncertainty of expectations has increased to 1.06% in February 2024, from 0.88% reported in December 2023.
Chart 2: Expected CPI headline inflation (%) - one year ahead
B. Costs
- The cost perceptions data in February 2024 indicate mild increase in cost pressures. However, the percentage of firms perceiving significant cost increase (over 6%) in February 2024 has marginally declined to 30%, from around 31% reported in January 2024 (Chart 3).
- The percentage of firms reporting moderate cost increase (3.1% to 6.0%), on the other hand, has increased from 25% in January 2024 to 28% in February 2024.
Chart 2: How do current costs per unit compare with this time last year? – % responses
C. Sales Levels
- About 19% of the firms are reporting ‘somewhat greater than normal’ sales in February 2024 – marginally up from 18% reported in January 2024 (Chart 4).
- About 47% of the firms are reporting ‘normal’ or greater sales in February 2024 – moderately up from 43% reported in January 2024 2 .
Chart 4: Sales Levels - % response
D. Profit Margins
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Around 40% of the firms in February 2024 are reporting profit margins to be ‘about normal’ or greater – almost same as reported in January 2024 (Chart 5).
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Overall, the profit margins expectations have remained somewhat muted during Jan-Feb 2024.
Chart 5: Profit Margins - % response
Business Inflation Expectation Survey (BIES) – Questionnaire
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A. Current Business Conditions Q1. How do your current PROFIT MARGINS@ compare with "normal"* times? Q2. How do your current sales levels compare with SALES LEVELS@ during what you consider to be "normal"* times? @ of the main or most important product in terms of sales. |
| B. Current Costs Per Unit^ Q3. Looking back, how do your current COSTS PER UNIT compare with this time last year? o Down (< -1%) o About unchanged (-1% to 1%) o Up somewhat (1.1% to 3%) o Up moderately (3.1% to 6%) o Up significantly (6.1% to 10%) o Up very significantly (> 10%) ' of the main or most important product in terms of sales. |
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C. Forward Looking Costs Per Unit$ o Unit costs down (less than -1%) $ of the main or most important product in terms of sales. |
Reports Archival
2024 Results
Summary Data
Consolidated excel file containing all the previous months survey results - Bies - Results.
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