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Price Hike Pressure To Continue Across Sectors; Know Why

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Inflation is becoming one of the hottest topics in the country, with the CPI growth numbers rising to an eight-year-high level in April. Now, the rising retail inflation has also started getting reflected in the MRP of products across segments. FMCG products, such as soap, shampoo & biscuits, manufacturing items including TV and AC, and restaurant bills, among others, have been witnessing continuous price hike pressures in the recent months.

Recently, Indonesia banned palm oil export, which restricted its supply in India, thus putting price hike pressure. Palm oil is used as a raw material for various industries to manufacture products ranging from soaps, shampoos, noodles and biscuits to chocolates. The shortage in the supply of palm oil will push its prices, which, in turn, will raise the input cost of these products and hence prices.

Following this, Hindustan Unilever Ltd (HUL) raised prices of its goods by up to 15 per cent across segments. its Sunsilk shampoo’s price was increased by Rs 8-10 across variants, while 100-ml Clinic Plus shampoo got costlier by 15 per cent. The price of Pears 125 gm soap was hiked by 2.4 per cent and multipack by 3.7 per cent. Lux soap has seen an increase of nine per cent in prices for some multipack variants. Glow & Lovely price has been hiked by 6-8 per cent. Ponds talcum powder price has also been raised by 5-7 per cent.

The company in April also increased the price of its products in the range of 3-20 per cent across skin cleansing and detergents.

According to a Bloomberg report, the price of Surf Excel went up by 20 per cent in January. The laundry detergent falls under the ‘magic price points’ (such as Rs 5 or Rs 10) for buyers with tight budgets. “Almost 30 per cent of our business comes from packs that operate at magic price points,” according to the report quoting Ritesh Tiwari, chief financial officer of Hindustan Unilever.

Meanwhile, a weaker Indian rupee also took a toll on input costs of companies manufacturing home appliances and consumer electronics, including TV, washing machines and refrigerators. The rupee on May 12 fell to an all-time low of 77.63 to a dollar.

The Consumer Electronics and Appliances Manufacturers Association (CEAMA) recently said the fall of the Indian currency against the dollar is creating more problems for the industry. “From June onwards, we will see a price increase of 3-5 per cent,” its President Eric Braganza has said.

Apart from this, rising commodity prices amid the Russia-Ukraine war are affecting input costs of food industry. Quick-service restaurants such as Dominos, bars and cafes are witnessing a price hike of up to 15 per cent. Jubilant FoodWorks, which operates Domino’s Pizza, recently raised prices by 5 per cent last month, its second increase in five months after a 4-5 per cent price hike late last year.
Current Retail Inflation Scenario

The Consumer Price Index (CPI)-based inflation, which the RBI takes as a reference point while deciding on the monetary policy, in April 2022 soared to an eight-year high of 7.79 per cent. It is as compared with 4.23 per cent in April 2021 and 6.97 per cent in March 2022. Inflation in the food basket rose to 8.38 per cent in April, from 7.68 per cent in the preceding month and 1.96 per cent in the year-ago month.

Is It Peak Level?

Suvodeep Rakshit, senior economist at Kotak Institutional Equities, said, “April headline inflation print is likely to be the peak for the year. However, we do not expect inflation to go below 6 per cent for the rest of the year with prints over the next few months remaining around 7-7.5 per cent.”

DSP Mutual Fund also said the latest reading is likely to mark the peak statistically but H1 inflation could remain well above 6 per cent. “The RBI’s inflation expectation of 5.7 per cent for the current financial year is likely to be revised upwards in the June policy.”

Vivek Rathi, director (research) of Knight Frank India, said, “The sooner the geopolitical tension on account of (the Russia-Ukraine) war and trade sanctions ease, better it will get for global economic growth and price stability.”

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