Input Cost Inflation Anticipated To Intensify According To IHS Markit Business Outlook Survey

The latest IHS Markit Business Outlook survey shows that business sentiment regarding future activity in India is unchanged from the previous survey period in June and below the BRIC average. However, private sector companies project faster increases in new business, business revenues, capex and profitability in the year ahead. At the same time, inflation expectations are at the joint - highest since October 2016.

At +20%, the net balance of Indian businesses expecting growth in output over the next 12 months is unchanged from February, and below the average recorded for BRIC nations (+23%) and globally (+31%). At the sector level, Indian manufacturing companies & signalled a stronger degree of positive sentiment, while service providers are less upbeat than in the prior survey period. Positive projections for business activity are rooted in expectations of stable market conditions and an improvement in client demand over the next 12 months, according to anecdotal evidence.

Meanwhile, threats to the 12 - month outlook are centered on uncertainty surrounding policy decisions, intense competition, high fuel prices and strong cost pressures. Companies anticipate higher inflows of new work in the next 12 months. The net balance of firms predicting greater new business rose from a survey - record low to the highest since October 2016, but is slightly weaker than the BRIC average.

However, input cost inflation is anticipated to intensify in the year ahead, with the net balance of firms predicting higher prices the joint-strongest since October 2016 and slightly above the BRIC average. Subsequently, inflation expectations surrounding output charges are also the strongest since October 2016. Both manufacturing and service providers predict stronger inflationary pressures, according to the latest survey data.

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