Business Desk – Ahead of the festive season, inflation is set to take another toll on ordinary people’s pockets. Many of the country’s major FMCG and consumer goods companies are preparing to raise the prices of their products. This could impact everyday items like toothpaste, detergent, dishwashing bars, salt, paint, home appliances, dairy products, and tires.
At least eight companies, including Hindustan Unilever (HUL), Asian Paints, Dodla Dairy, Havells, and Tata Consumer Products, have indicated they will raise prices. The companies say that ongoing tensions in the Middle East, rising input costs, crude oil, and energy prices are driving up costs. Consequently, price increases have become a necessity.
Which items may become expensive?
Products that could see price increases ahead of the festive season include detergents, dishwashing bars, toothpaste, salt, paint, dairy products, home appliances, and tires. Companies are preparing to raise prices for the second consecutive quarter.
HUL said – increasing prices in the home care segment
Niranjan Gupta, Chief Financial Officer (CFO) of Hindustan Unilever (HUL), the country’s largest FMCG company, told analysts that external factors have led to higher prices of crude oil-related derivatives. Therefore, the company is cautiously increasing prices in the home care segment, which includes categories such as detergents and dishwashing bars.
Havells increased prices by 8% and Tata Salt by 7%
Several companies have already raised prices.
Havells India has raised the prices of its products by about 8%.
Tata Consumer Products has raised the price of Tata Salt by about 7%.
Apart from this, many companies including HUL, Dodla Dairy, Asian Paints are also preparing to increase prices in the coming quarters.
Why are prices increasing even before the festivals?
The country’s festive season lasts from August to November. Major festivals such as Raksha Bandhan, Ganesh Utsav, Navratri, Dussehra, and Diwali fall during this time. Consumer spending is highest during this time.
This season accounts for nearly a third (33%) of annual sales for many companies. Given the strong demand, companies are preparing to pass on the increased costs to customers.
Why are companies raising prices?
Crude oil and energy prices remain elevated due to ongoing conflict in the Middle East and rising tensions between the US and Iran. This has increased the costs of raw materials, transportation, and manufacturing.
Experts say that when input costs rise, it becomes difficult for companies to sell goods at the old prices. Therefore, they raise prices to maintain profit margins.
Inflation is also increasing pressure
Retail inflation rose above the RBI’s 4% target in June for the first time in nearly a year, though it remains within the RBI’s tolerance band of 2% to 6%.
If companies continue to raise prices in the coming months and food inflation also rises, inflationary pressures could increase further. The RBI estimates that average inflation could be 5.1% in the fiscal year ending March 2027.
RBI meeting will also be monitored
The Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) will meet from August 3 to 5. A decision on interest rates will be announced after the meeting.
At present, experts believe that there is little possibility of change in Repo Rate, but in case of increase in inflation, RBI’s policy may be affected in future.
What do experts say?
Sonal Verma, Asia chief economist at Nomura Holdings, says that due to increasing pressure on input costs and margins of companies, companies are left with little option but to increase prices.
Meanwhile, Ravikant Jaipuria, chairman of Devyani International, which runs KFC and Pizza Hut, said that while demand remains strong at the moment, a weak monsoon and the threat of El Nino could impact consumer spending in the future.
Demand remains strong in rural and urban markets
According to the companies, currently the demand remains strong in both rural and urban markets.
According to a survey by the Retailers Association of India, retail sales in June increased by 6% compared to the previous year. Arvind Singhal, chairman of The Knowledge Company, said economic indicators such as GST collection and highway toll revenue also indicate strong demand in the market.
What is El Nino and Input Cost?
El Niño is a meteorological phenomenon characterized by abnormally warm waters in the Pacific Ocean. This can weaken the monsoon in India, reducing crop production and increasing food inflation.
Input cost is the total cost of raw materials, fuel, electricity, transportation, and labor required to produce a product. When these costs rise, companies raise the prices of their products to maintain their profit margins.