Many Indians are reducing their consumption of fried foods and even vegetables as the war in Ukraine inflates the prices of items ranging from edible oils to fuel, threatening a tentative recovery of the consumption-based economy after two years of struggle against COVID-19.
Consumers in Asia’s third-largest economy are feeling the bite as businesses pass on rising costs since the invasion, battling the first rises in five months in diesel and petrol prices this week, as well as more expensive vegetable oils.
“God only knows how we are going to handle this level of price hikes,” said Indrani Majumder, the sole earner of a family of four in the eastern city of Kolkata, adding that the last two years of the pandemic had reduced by half the wages.
These days, her family eats more boiled foods to save on the cost of edible oil, she said. It’s just one of nearly a dozen homes where people said they were taking similar action.
India’s economy grew at a slower-than-expected pace in the October-December quarter, and economists expect growth to slow further in the present as high fuel prices push up inflation .
Private consumption contributes the largest share of gross domestic production, at almost 60%.
But since the invasion at the end of February, which Russia calls a “special operation”, Indian companies have raised the prices of milk, instant noodles, chicken and other key products by around 5% to 20%.
About 800 million of a population of nearly 1.4 billion have received free government supplies of staple foods during the pandemic, and even small price hikes can now spell a blow to their budgets.
Family finances could remain anemic for the third consecutive year, warned Pronab Sen, India’s former chief statistician.
“The process of rebuilding savings was just beginning after the pandemic,” he added. “Because of this latest shock, they will have to reduce their consumption.”
Soaring global crude prices prompted companies in that import-dependent country to raise retail gasoline and diesel prices twice this week. India imports 85% of its crude oil, the prices of which have risen nearly 50% this year.
The South Asian nation is also the world’s largest importer of edible oil, shipping nearly 60% of its requirements.
But the price of palm, the most consumed edible oil in the country, has jumped 45% this year. And supplies of sunflower oil, which Ukraine and Russia produce in large quantities, have been disrupted.
Some wholesalers said their edible oil sales fell by a quarter over the past month as prices rose.
These factors helped keep retail price inflation in India in February above the central bank’s comfort level of 6% for the second consecutive month, while the wholesale rate was above 13%.
“The timing of input price inflation could not have been worse against the backdrop of a slowing consumer trend,” financial services firm Jefferies said in a note.
The central bank said it was monitoring crude and commodity prices ahead of its next monetary policy meeting in early April. But markets are not expecting the Reserve Bank of India to change its key rates as it seeks to prioritize growth.
This position is comparable to that of the world’s central banks, which have raised their rates or are considering whether to do so to curb inflation. For example, policymakers at the US Federal Reserve this week called for big rate hikes in May.
For consumers, little relief in sight.
The All India Traders Confederation estimates that input costs for manufacturers of durable consumer goods and fast moving consumer goods (FMCG) will rise another 10-15% this month as fuel prices rise. increase, an expense intended to be passed on to the final consumer.
In Kolkata, vegetable seller Debashis Dhara said higher transport costs will boost vegetable prices by another 5% this week. Its sales have already halved since February.
India’s Mother Dairy and Amul have raised milk prices by almost 5% this month, while FMCG companies such as Hindustan Unilever and Nestle are charging more for items such as instant noodles, tea and coffee .
Broiler chicken prices jumped nearly 45% in six months to a record 145 rupees ($1.90) per kg this week as key feed ingredients maize and soybean meal became costlier after supplies from the Black Sea region were affected.
Fertilizer prices have hit a record $150 a ton since Russia, one of the biggest producers, brought tanks and troops into Ukraine.
“It has become very difficult to manage our monthly budget,” said Archana Pawar, a housewife in the financial capital of Mumbai. “This kind of price increase forces us to reduce our consumption.”
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