War's Ripple Effect: Indian Households Face Rising Costs on Everyday Goods

A packet of milk, a simple thali meal, packaged consumer goods, an air-conditioner that’s almost a non-negotiable purchase now for many households amid rising temperatures, a box of paint, gold jewellery, a restaurant feast or an air-ticket—the war has hit low income and middle class Indians, making them pay more for a lot of things that are part of everyday spends. Be it high LPG costs which directly affect eateries or hike in gold import duty necessitated to check foreign exchange outflows, the war has left no sector untouched. Companies across many segments have already taken at least one round of price hikes and have also been factoring in another round soon given the spike in input costs on the back of disruption of energy supplies. The recent fuel price hike will only inflate household budgets. In its recent earnings call (a day before the fuel price changes), Tata Group’s Voltas said that the firm has passed on some price increases to consumers and is “open” to pass on any further increases that need to be done. Blue Star has taken a 5% price hike in ACs on an average linked to energy-change norms and another 8% to cope with high raw material costs and fluctuation in exchange rate. AC makers have been reeling under high commodity inflation such as that of copper even pre-war and now demand impact is another challenge they may have to tackle going ahead. “Let us say, tomorrow petroleum prices increase….and inflation peaks during this period, consumer sentiments may force them not to spend,” B Thiagarajan, MD Blue Star, said in an earnings call earlier this month. For companies, a controlled domestic inflation had long been a buffer amid global macro-volatility but the war has changed that equation, posing worries for consumption from here on. Analysts expect the hike in retail fuel prices to drive headline inflation print by around 10-25 basis points in the coming months. Amul which recently raised the prices of fresh pouch milk by Rs 2 per litre said that there has been a substantial increase in cost of cattle feed, milk packaging film and fuel during the year. Godrej Consumer Products (GCPL) has taken price hikes in the range of 4-7% across soaps, detergent and household insecticide categories. Marico has taken about a 6-7% price increase already while biggest player Hindustan Unilever (HUL) has effected a 2-5% price hike, signalling more could be in the offing. In the paints space, Asian Paints has taken two price hikes ranging 9-14% in all, analysts said. The recent hike in gold import duty will lead to a dip in near-term sales volumes, industry executives said. “Policy shifts and higher prices that arrive unexpectedly could mean consumers put off non-essential purchases for a while,” said Amit Modak, CEO at P N Gadgil & Sons.