Corporate India could be a much bigger victim to rising prices than the common man with cost of doing business soaring up to 35 per cent 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 per cent per annum, well ahead of 7-8 per cent 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.                                  

Country's headline inflation, which has soared to a four-year high of over seven per cent, has been dominating India's economic landscape in recent months.

"We expect the level and direction of inflation to be a dominant economic theme over the near and medium term," Citigroup analyst Aditya Narain said in the report.

Besides, the key components of investments depending on the business include steel, land/rental, labour/people and capital. Each of these components have risen well ahead of generalised inflation levels, although some of these components have also contributed to headline inflation.

However, there are also particular businesses that have witnessed relatively less inflation, but that is in the minority and largely technology or process change based.

While these pressures are in part global phenomenon like high steel prices, the rest of them impacting the setting of a business like land, labour and capital are primarily local India phenomena, the report stated.

Rise in business inflation in labour segment is the highest with 36 per cent three-year compounded annual growth rate, followed by bank branch at 33 per cent, land at 24 per cent and cement 18 per cent.

Besides, power and telecom sectors's the business inflation has grown 13 per cent and 11 per cent over the past three years, respectively, the report reveals.

Inflation, the silent killer