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Cost of living rises in India as companies pass on
higher prices
Companies from the Indian units of Unilever Plc and Suzuki Motor Corp. to homegrown
JSW Steel Ltd. are raising prices in response to the global supply squeeze
Indian manufacturers are running out of capacity to absorb rising input
costs, with an increasing number passing it along to consumers in an
economy already grappling with Asia’s third-fastest inflation and an uneven
recovery. Companies from the Indian units of Unilever Plc and Suzuki
Motor Corp. to homegrown JSW Steel Ltd. are raising prices in response
to the global supply squeeze made worse by the surge in energy costs
following Russia’s invasion of Ukraine. Higher retail fuel prices are also
threatening to hurt demand just as the economy returned to its first full-
year of growth after the pandemic-induced 6.6% contraction in the fiscal
year ended March 2021.
Companies passing on costs will add to inflationary pressures, but the
consumer price-targeting RBI has maintained that the current spike is
supply driven and best dealt with by the government. Policy makers, who
will meet this week to decide on interest rates, have signaled they may
revise their 4.5% inflation forecast for fiscal 2023 but do little else to tighten
settings for fear of hurting growth momentum.
“While not acknowledged by the central bank yet, there is telltale evidence
of inflation likely being much higher,” said Kunal Kundu, an economist with
Societe Generale GSC Pvt. That “can further
imperil consumer
confidence.” Consumers are key to the country’s economic recovery, with
private consumption accounting for some 60% of India’s gross domestic
product. To foster demand, the central bank will likely keep borrowing
costs lower for longer.