Cos' 1-year-ahead inflation expectation 4% plus: IIM Survey

NEW DELHI: Inflation expectations of companies edged down marginally in May but remained above 4% for the third consecutive month, according to Indian Institute of ManagementAhmedabad's Business Inflation Expectations Survey.

The survey, based on the responses of around 1,300 companies--primarily from the manufacturing sector-showed one-year-ahead inflation expectations eased by 13 basis points to 4.24% in May.

The one-year-ahead inflation expectations of businesses, as per the survey, is far higher than the Reserve Bank of India's forecast for Consumer Price Index inflation.

According to the central bank's latest forecast, headline retail inflation is seen averaging 2.4% in Jan-Mar 2021, while Monetary Policy Committee external member Ravindra Dholakia has conservatively pegged it at 3.13.2% for the same period. "

Thus, inflation rising above the target of 4% does not seem to be any concern for the policy right now," Dholakia noted in the minutes of the May 20-22 meeting of the MPC. Dholakia, formerly a professor at IIM-Ahmedabad, often quotes the results of the Business Inflation Expectations Survey.

He has been critical of the RBI's inflation forecasts and said the survey was "very consistent, and more reliable" than the central bank's inflation forecasts. In the absence of the latest headline inflation print--the National Statistics Office did not compile the general CPI index for April and May.