Business Inflation Expectations Rise Slightly in October 2025 – Insights for Tech Companies

Business inflation expectations in India edged up slightly in October 2025, rising to 3.97% from 3.79% in September, according to the latest Business Inflation Expectations Survey (BIES) conducted by the Misra Centre for Financial Markets and Economy at IIM Ahmedabad. Despite a largely muted demand environment, the findings signal a stable medium‑term view among firms and a cautious optimism that could influence monetary policy and corporate planning in the months ahead.

Background and Context

Since the global fallout from the COVID‑19 pandemic began to abate, Indian businesses have been navigating a complex mix of supply‑chain disruptions, changing consumer preferences, and evolving monetary conditions. The BIES questionnaire, a monthly survey of around 900 manufacturing‑sector firms, tracks the price setters in the economy, offering a unique lens into how businesses anticipate future input costs and selling prices. In the context of a recent tightening by the Reserve Bank of India (RBI) and ongoing fiscal stimulus aims, the measured increase in one‑year‑ahead inflation expectations provides a barometer for the risks that could steer the central bank’s policy stance.

Key Developments from the Latest BIES Round

The October 2025 edition—marking the 102nd iteration—delivers several headline insights:

• Inflation expectations climb 18 basis points. Firms now anticipate an average CPI inflation of 3.97% at one year’s horizon, a modest rise that still keeps expectations well below the RBI’s 4% target.
• Retail CPI outlook softens. The survey’s supplementary question, administered in alternate months, shows companies projecting headline CPI at 3.83%—down from the 4.27% forecast earlier in the year.
• Input‑cost uncertainty shrinks. The variance‑based measure of expected unit cost increases settled at 1.90%, unchanged from September, indicating that firms see no sharp uptick in price volatility.
• Cost‑pressure metrics remain contained. The share of firms expecting a significant (>6%) or very significant (>10%) cost rise dropped to 24% from 25% in September.
• Sales sentiment remains subdued. Over 60% of respondents reported sales “much less than normal” or “somewhat less than normal” in the June–October window, with only 38% seeing sales “about normal” or better.
• Profit outlook improves. The proportion of firms expecting “about normal” or higher profit margins jumped to 37% from 26% in September, reflecting easing cost pressures rather than stronger demand.

Implications for Business and Students

For corporate finance teams and international students with business or finance majors, these data points offer tangible lessons:

• Market valuation models should incorporate the slight uptick in inflation expectations rather than rely on a static 4% figure.
• Supply‑chain risk buffers may need adjustment, since firms are still wary of cost spikes but less likely to flag dramatic input shocks.
• Investment decisions in manufacturing sectors ought to factor in the prevailing sales dampness, even as margin forecasts brighten.
• Students studying macroeconomics can use the BIES as a case study in forward‑looking inflation measurement and its effect on monetary policy frameworks.

Expert Insights and Practical Tips

“A 18‑basis‑point uptick signals caution without alarm,” comments Dr. Ravi Kapoor, senior economist at the Centre for Economic Studies. “Policymakers will likely maintain RBI’s accommodative stance until the sales rebound materialises.” For businesses, the takeaway is to:

• Re‑evaluate pricing strategies with a view to preserving margins given the lower input‑price uncertainty.
• Re‑balance capital allocation between maintaining inventory and investing in research and development to spur demand.
• Implement hedging mechanisms for key commodities only if cost‑increase expectations exceed the 6–10% threshold.
• Students can benefit from internships during this period to observe how firms respond to subtle shifts in inflation expectations.

Meanwhile, market analysts advise firms to keep a close eye on sector‑specific CPI indicators, especially in technology, real estate, and consumer staples, as sectoral dynamics may differ from aggregate trends.

Looking Ahead: Future Trends and Policy Outlook

The coming months will test whether the modest rise in business inflation expectations translates into broader economic momentum. If sales begin to recover—supported by a buoyant services rebound—the RBI may face pressure to tighten policy sooner. Conversely, sustained sales softness could prompt further monetary easing. In the intermediate term, the BIES data suggest that firms will remain guarded, but with a higher tolerance for mild price increases. Policymakers will likely continue the dual mandate, balancing growth against price stability, while staying attuned to the business voice captured in this monthly survey.

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