- Companies raise prices, shrink products amidst surging costs.
- Weak rupee, crude oil, global disruptions increase input costs.
- Firms raise prices, cut costs, optimize supply chains.
Indian companies, squeezed by surging input costs, are passing the burden on to consumers through price hikes and smaller product sizes. Notably, on June 5, the Reserve Bank of India’s monetary policy committee raised its inflation forecast for the upcoming financial year, citing a sub-normal monsoon forecast and the risk of an El Niño comeback as key upside risks to prices.
Rising crude oil prices, driven by supply disruptions, have pushed up the cost of raw materials and finished products across sectors. A weakening rupee, pressured by foreign portfolio investor outflows, has made imported materials more expensive for manufacturers. Even packaging costs have risen, since the dyes used in wrappers are petroleum-based, meaning smaller packs cut down on that expense too.
Global Pressures Compound Domestic Woes
The strain is not only homegrown. The US-Israel and Iran war has disrupted trade routes and lifted input costs worldwide, hitting import-reliant economies like India particularly hard. A weaker rupee is adding to inflationary pressure and complicating pricing decisions for companies at a time when consumer demand remains uneven.
From smaller packs on supermarket shelves to higher prices at checkout, Indian companies are scrambling to protect their margins as oil, freight and insurance costs pile on.
FMCG Companies Act First
Consumer goods companies have been among the quickest to respond. Hindustan Unilever, Godrej Consumer Products and Dabur India have already rolled out low-to mid-single-digit price hikes across product categories, with Britannia preparing similar moves.
But raising sticker prices is not always an option. Pricing power remains weak in mass-market segments, where companies are holding the line on 10 to 20-rupee packs and instead shrinking the quantity inside the pack.
“We are reducing grammage because we can’t breach those price points,” Dabur’s global CEO Mohit Malhotra told Reuters.
This practice, sometimes called shrinkflation, allows companies to keep shelf prices unchanged while quietly delivering less to the consumer.
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Automakers And Airlines Follow
The pressure has spread well beyond grocery aisles. Automakers Maruti Suzuki, Mahindra and Mahindra, Tata Motors Passenger Vehicles, and Hyundai Motor India have all hiked prices.
Airlines are adjusting, too. IndiGo and Air India are trimming capacity, especially on fuel-heavy international routes, while also increasing fares to offset higher aviation fuel costs.
Companies Cut Costs Where They Can
With limited room to raise prices, many companies are turning inward. Hindustan Unilever has cut advertising spend, while others are trimming non-essential travel and marketing costs.
Sectors with significant global exposure, including aviation, oil and gas, chemicals, logistics and capital goods, may continue to face margin pressure, Shweta Rajani, associate director at Anand Rathi Wealth, told the news agency.
Supply chain rerouting is also underway. Companies with West Asian exposure are diverting shipments, diversifying their sourcing and shifting production. Dabur is using alternative routes via Egypt and Turkey, while Britannia is bringing some production back to India.
Some firms are also front-loading purchases to lock in costs before prices rise further, while closely tracking demand to avoid overstocking. This is a sign of tighter financial discipline across the board.
Arvind Fashions has advanced inventory buys to lock in costs and is relying more on local suppliers. Tata Group retailer Trent, which runs the Gen-Z-focused affordable fashion brand Zudio, is tweaking raw materials, packaging and product development to manage costs.
“My priority is not to take prices up,” Umashan Naidoo, head of customer and beauty at Trent, said.
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LPG Costs Rise Too
LPG prices have seen back-to-back hikes in recent months, squeezing households and businesses alike. Domestic cylinders now cost Rs 942 in Delhi, after a Rs 29 hike on June 7, the second increase in three months. For lower-income families, where LPG is the primary cooking fuel, even a modest price rise cuts directly into the monthly budget.
Commercial establishments like restaurants, dhabas and small factories are bearing an even sharper end of the stick, as industrial-grade cylinder prices have climbed far more steeply. Those costs, inevitably, find their way back to the consumer’s plate. It is a pattern playing out across the economy: what begins as a global supply shock ends as a quietly heavier grocery bill for ordinary Indians.
The Consumer Bears the Cost
Whether companies raise prices or reduce pack sizes, the result is the same for the consumer: less value for money. With the RBI already flagging inflation risks and global disruptions showing no signs of quick resolution, relief may not come soon. Indian households, already navigating uneven demand conditions, may have to brace for a prolonged period of tighter budgets at the checkout counter.
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