The upward pressure on prices will continue in all sectors; Know why

Inflation is becoming one of the hottest topics in the country, with CPI growth figures hitting their highest level in eight years in April. Now, rising retail inflation has also started to be reflected in product MRP across all segments. FMCG products, such as soap, shampoo and cookies, manufactured items such as television and air conditioning, and restaurant bills, among others, have come under continued price pressures over the past few months.

Recently, Indonesia banned the export of palm oil, which has restricted its supply to India, thus putting pressure on higher prices. Palm oil is used as a raw material in various industries to make products ranging from soaps, shampoos, noodles and cookies to chocolates. The shortage of palm oil supply will drive up its prices, which, in turn, will increase the input cost of these products and therefore prices.

Subsequently, Hindustan Unilever Ltd (HUL) increased the prices of its products by up to 15% across all segments. the price of its Sunsilk shampoo has been increased by 8-10 rupees depending on the variant, while the Clinic Plus 100ml shampoo has become more expensive by 15%. The price of the Pears 125 g soap increased by 2.4% and that of the multipack by 3.7%. Lux soap saw a 9% increase in prices for some multipack variants. The price of Glow & Lovely has been increased by 6-8%. The price of pond talcum powder has also been increased by 5-7%.

In April, the company also increased the price of its products by a range of 3-20% for skin cleansing and detergents.

According to a Bloomberg report, the price of Surf Excel rose 20% in January. Laundry detergent falls under “magic prices” (such as Rs 5 or Rs 10) for buyers on tight budgets. “Almost 30% of our business comes from packs that operate at magic prices,” according to the report quoting Ritesh Tiwari, chief financial officer of Hindustan Unilever.

Meanwhile, a weaker Indian rupee also weighed on input costs for companies making household appliances and consumer electronics, including televisions, washing machines and refrigerators. On May 12, the rupee fell to an all-time low of 77.63 per dollar.

The Consumer Electronics and Appliances Manufacturers Association (CEAMA) recently said that the Indian currency’s fall against the dollar is creating more problems for the industry. “From June, we will see a price increase of 3 to 5%,” said its president Eric Braganza.

Apart from this, rising commodity prices amid the Russian-Ukrainian war is affecting the input costs of the food industry. Quick service restaurants such as Dominos, bars and cafes are experiencing price increases of up to 15%. Jubilant FoodWorks, which operates Domino’s Pizza, recently raised prices by 5% last month, its second increase in five months after a price hike of 4-5% at the end of last year.

Current Retail Price Inflation Scenario

Inflation based on the Consumer Price Index (CPI), which the RBI takes as its benchmark when deciding monetary policy, in April 2022 hit an eight-year high of 7.79 percent. It is compared to 4.23% in April 2021 and 6.97% in March 2022. Food basket inflation rose to 8.38% in April, from 7.68% the previous month and 1.96% the month of the previous year. .

Is this the maximum level?

Suvodeep Rakshit, senior economist at Kotak Institutional Equities, said: “Headline inflation in April is likely to be the peak of the year. However, we do not expect inflation to fall below 6% for the remainder of the year, with drawdowns over the next few months remaining around 7-7.5%. »

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

Vivek Rathi, Director (Research) of Knight Frank India, said: “The sooner the geopolitical tension due to the (Russian-Ukrainian) war and trade sanctions eases, the better it will be for global economic growth and the stability of price.

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