Inflation pinches corporates more

Corporate India could be a much bigger victim to rising prices than the common man with cost of doing business soaring up to 35 percent or about five times the wholesale price index levels.

It is the inflation faced by businesses in setting up and expanding manufacturing capacities, distribution and franchises, or simply investing in India and the concept becomes meaningful given the country is primarily investment led, according to new report by Citigroup global markets.

Citigroup has chosen to term this concept as "business inflation" which loosely represents the rising cost of setting up a business in India. This measure is primarily conceptual and directional and not something that seeks to be particularly robust or consistent in construct or level.

This is another kind of inflation which is not adequately captured in data or headlines, but has a more meaningful impact on corporate profitability, their investing frame-work
and over the time in equity markets, the research wing of global financial giant believes.

"Rising costs of setting up business, including asset, capital and services-based over the last three years suggests business inflation could be as high as 10-35 percent per annum, well ahead of 7-8 percent headline inflation," the report noted.

The increase in costs to establish new businesses has risen significantly ahead of the headline inflation and it has been sustaining at a high level for past three years, while
the surge in headline inflation is being noticed from just about a couple of months rather than for a sustained period, analysts believe.