Corporate India is bracing for another round of inflation-led stress after the government’s latest increase in petrol and diesel prices, a move executives say will raise freight and logistics costs across sectors already grappling with elevated packaging expenses triggered by the Iran war.
Top executives in fast-moving consumer goods (FMCG), automobiles, consumer durables and paints told FE that the latest fuel price revision could force companies to undertake fresh price hikes in June-July, even as urban demand remains uneven and rural recovery fragile. The concern is that a second wave of inflation—coming after earlier increases in crude-linked inputs such as packaging materials, chemicals and derivatives—may weaken discretionary spending in FY27.
“From a demand perspective, the focus will be on essentials. Discretionary spending will moderate as inflationary pressures grow,” Mohit Malhotra, global CEO, Dabur, said. “While FMCG companies were taking calibrated price hikes in April-May, another round now looks unavoidable,” he said.
Last week, Dabur announced a 4% price hike across segments to mitigate inflationary pressures for the June quarter. A second round of increases could follow in the September quarter, Malhotra added.
Consumer Durables Face Slump
Consumer durable makers are also preparing for another increase in prices across categories such as air-conditioners, refrigerators and washing machines. “Though the fuel price hike was anticipated, a third round of price increases hardly bodes well for consumer demand. It will take a hit at a time when the summer season has been mixed due to unseasonal rains in the north, south and east,” said Kamal Nandi, business head and executive vice-president, appliances business, Godrej Enterprises Group.
Industry estimates suggest that between January and April, AC prices rose 10-12%, refrigerators by 6-8%, and washing machines by 4-5% in two rounds of price hikes. Durable companies are now considering an additional 3-4% increase to offset higher fuel-linked costs.
Double-Whammy Costs
Automobile companies, too, expect rising logistics and input costs to pressure profitability, especially in the mass-market segment where pricing flexibility remains limited.
“The commodity inflation impact has been significant,” Shailesh Chandra, managing director and chief executive officer, Tata Motors Passenger Vehicles, said during a recent investor call. “We are intensifying cost reduction actions across the organization. Price is something we will be actively considering in the coming months. The idea would be to protect customers’ value equation where we can, but act on pricing where we must,” he said.
Car makers, including Tata Motors, had last raised prices in January as part of their annual revisions. Analysts say another round may now be inevitable if fuel and commodity costs remain elevated.
Paint manufacturers are facing a similar squeeze. “Crude derivatives form nearly 35-40% of input costs for the paint industry. Add higher freight costs to that and margins come under pressure immediately,” said a senior executive at a large paint company. Several paint firms had implemented selective hikes in April, but broader revisions are now expected in June-July.
Analysts warned that persistent inflation could weigh on FY27 consumption growth at a time when companies were counting on improving rural demand and a festival-led recovery.
“Sustained elevated crude prices due to West Asia tensions remain a concern for an import-dependent country like India. If fuel inflation persists for a prolonged period, it can impact discretionary spending, retail consumption and overall market confidence,” said Jatin Ahuja, founder and managing director, Big Boy Toyz, and legal adviser to the All India Car Dealers Association.
Ahuja said that while rising ownership costs may temporarily affect consumer sentiment in the automobile market, demand for fuel-efficient, hybrid and electric vehicles could see stronger traction in the coming months.