Many Indians are cutting back on fried foods and even vegetables as the war in Ukraine fuels the prices of items from edible oils, threatening a sputtering recovery in the consumption-based economy after two years of battling COVID-19.
Consumers in Asia’s third-largest economy are feeling the bite as companies are passing on a rise in costs since the invasion and this week are battling the first rise in five months in the prices of diesel and gasoline, as well as more expensive vegetable oils.
“God only knows how we will manage this level of price hike,” said Indrani Majumder, the sole earner in a family of four in the eastern city of Kolkata, adding that the past two years of the pandemic had seen salaries cut in half.
Today, her family eats more cooked food 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 steps.
India’s economy grew at a slower pace than expected in the October to December quarter, and economists predict a further dent in growth in the current one as high fuel prices push inflation up.
Private consumption accounts for the largest share of gross domestic production at almost 60%.
But since the invasion in late February, Indian companies have increased the prices of milk, instant noodles, chicken and other key products by about 5% to 20%.
About 800 million of a population of nearly 1.4 billion received free staple foods from the government during the pandemic, and even small price increases could now put a dent in their budgets.
Families’ finances could remain anemic for the third year in a row, Pronab Sen, India’s former chief statistician, warned.
“The process of rebuilding savings only started after the pandemic,” he added. “Because of this latest shock, they will have to cut back on consumption.”
Rising global crude oil prices have prompted firms in the import-dependent country to hike gasoline and diesel sales prices twice this week. India imports 85% of its crude oil, pushing prices up nearly 50% this year.
The South Asian nation is also the world’s largest importer of edible oil, meeting nearly 60% of its needs.
But the price of palm, the country’s most consumed edible oil, is up 45% this year. And the supply of sunflower oil, which Ukraine and Russia produce in large quantities, has been disrupted.
Some wholesalers said their edible oil sales had fallen by a quarter in the past month as prices rose.
These factors helped keep Indian retail inflation above the central bank’s comfort level of 6% in February for the second straight month, while the wholesale rate was above 13%.
“The timing of input price inflation could not have been worse in the context of a slowing consumption trend,” financial services firm Jefferies said in a note.
The central bank has said it is monitoring crude oil 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 key interest rates as it appears to be prioritizing growth.
This attitude is similar to that of global central banks, which have either raised interest rates or are considering whether to do so to curb inflation. For example, policymakers at the US Federal Reserve called for sharp rate hikes in May this week.
There is little relief in sight for the consumer.
The Confederation of All India Traders estimates that input costs for makers of consumer durables and fast moving consumer goods (FMCG) will rise another 10% to 15% this month as fuel prices rise, an expense earmarked to pass on to the final consumer.
In Kolkata, vegetable seller Debashis Dhara said higher transportation costs would push vegetable prices up another 5% this week. Its turnover has already halved since February.
India’s Mother Dairy and Amul have increased milk prices by nearly 5% this month, while FMCG companies such as Hindustan Unilever and Nestle are asking more for products such as instant noodles, tea and coffee.
Broiler prices have risen nearly 45% in six months to a record 145 pounds per kg this week as key feed ingredients maize and soybean meal have become more expensive after supplies from the Black Sea region were affected.
Fertilizer prices have risen to a record $150 a ton since Russia, one of the largest producers, tanks and soldiers rolled into Ukraine.
“It has become very difficult to manage our monthly budget,” said Archana Pawar, a housewife in the financial capital of Mumbai. “These kinds of price increases force us to reduce consumption.”