However, the business school's Business Inflation Expectations Survey, conducted in February, provided more telling information on the performance of the participating companies. As per the survey, more than 64% of firms reported in February that sales were "much less than normal". This was up from 45% in January. "The proportion of firms in the sample reporting 'much less than normal' profit has jumped up by over 20% to 65% in February. Over 87% of the firms in the sample expect 'much less than normal or somewhat less than normal' profit margins," IIM-Ahmedabad said on Saturday.
The findings of the survey paint a grim picture of the Indian economy, which was already slowing even before the government announced a 21-day national lockdown starting Mar 25 to combat the spread of the coronavirus. In Oct-Dec, GDP growth fell to 4.7%. While the Indian government has announced certain steps to provide a safety net to the poor facing loss of income from the lockdown and the Reserve Bank of India has reduced the repo rate to a record low of 4.40%, analysts expect the economy to slow down alarmingly in 2020-21 (Apr-Mar).
Last week, Fitch Ratings slashed its projection for India by 310 basis points to 2.0% for 2020-21. The monthly survey by IIM-Ahmedabad has been cited by Ravindra Dholakia--one of the six members of the Monetary Policy Committee and a professor of economics at the management institute--in his statements to explain his decisions and stance. The companies surveyed by IIM-Ahmedabad are selected from the list of companies available with the Ministry of Corporate Affairs. Panellists are from various sectors, including manufacturing, wholesale and retail trade, suppliers, transport, and construction.
