Business leaders in India anticipate a slight uptick in inflation over the next year, even as they navigate a landscape of tepid sales but growing confidence in profitability. This is the key takeaway from the latest monthly survey conducted by the Misra Centre for Financial Markets and Economy at the Indian Institute of Management Ahmedabad (IIM-A).
Inflation Expectations and Cost Pressures
The Business Inflation Expectations Survey (BIES) for October 2025 reveals that firms' one-year-ahead inflation expectation has risen modestly to 3.97%. This marks an increase of 18 basis points from the 3.79% recorded in September 2025. Over the past year, these expectations have averaged around 4.14%, indicating that businesses maintain a relatively anchored view on medium-term price trends.
Notably, the perception of uncertainty regarding future cost increases remained stable. The survey's variance-based measure held steady at 1.90%, suggesting no major change in how companies view input-price volatility. Furthermore, the proportion of firms bracing for a significant cost jump of more than 6% dipped slightly to 24% from 25% the previous month.
Softer Retail Inflation View and Divergent Sales-Profit Trends
In a supplementary question aligned with the Reserve Bank of India's policy cycle, businesses projected the one-year-ahead Consumer Price Index (CPI) inflation at 3.83%. This is a sharp decline from the 4.27% expectation reported in August 2025, pointing to a significant softening in the retail inflation outlook among price setters in the economy.
The survey, which polled around 900 manufacturing firms for its 102nd edition, paints a complex picture of current business conditions. On one hand, sales momentum remains weak. Over 60% of companies reported sales levels that were 'much less than normal' or 'somewhat less than normal' between June and October 2025.
On the other hand, the profit sentiment has improved dramatically. The share of firms expecting 'about normal' or higher profit margins surged to 37% in October, a substantial jump from 26% in September. Respondents linked this optimism primarily to easing cost pressures rather than a revival in consumer demand.
Implications for Policy and Economic Recovery
The October 2025 survey findings collectively suggest a business environment where inflation expectations are steady, retail inflation projections are cooling, and profitability is recovering despite lacklustre sales. The contained pricing stress and muted cost-push risks offer a degree of comfort to policymakers at the RBI, who are tasked with balancing growth and price stability.
The critical question for the coming months is whether this newfound confidence in profit margins will translate into a broader economic recovery that also lifts sales volumes. For now, Indian businesses appear to be betting on inflation staying within a manageable range, even as they await a more robust pickup in market demand.
