Many Indians are cutting back on fried foods and even vegetables as the Ukraine war pushes up prices on items from cooking oils to fuel and threatens a faltering 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 pass on increases in costs since the invasion and this week battle the first hikes in diesel and gasoline prices in five months, as well as higher-priced vegetable oils.
“God only knows how we’re going to handle this price surge,” said Indrani Majumder, the sole breadwinner of a family of four in the eastern city of Kolkata, adding that the last two years of the pandemic have seen salaries halved.
Nowadays, her family eats more cooked food to save on the cost of cooking oil, she said. It’s just one of nearly a dozen homes where people said they were taking similar steps.
India’s economy expanded at a slower-than-expected pace in the October-December quarter, and economists are forecasting another dip in growth in the current quarter as high fuel prices push inflation higher.
At almost 60%, private consumption makes the largest contribution to gross domestic performance.
But since the invasion in late February, Indian firms have hiked prices of milk, instant noodles, chicken and other essential commodities by about 5% to 20%.
Some 800 million of a population of nearly 1.4 billion have received free government supplies of basic necessities during the pandemic, and even small price hikes can now take a hit on their budgets.
Families’ finances could remain anemic for the third straight year, warned Pronab Sen, India’s former chief statistician.
“The process of rebuilding savings only started after the pandemic,” he added. “Because of this recent shock, they need to cut back on their consumption.”
Soaring global crude prices have prompted companies in the import-dependent nation to hike retail prices for gasoline and diesel twice this week. India imports 85% of its crude oil, prices of which have risen by almost 50% this year.
The South Asian nation is also the world’s largest importer of cooking oil, shipping nearly 60% of its needs.
But the price of palm oil, the country’s most consumed cooking oil, is up 45% this year. The supply of sunflower oil, which is produced in large quantities by Ukraine and Russia, is also interrupted.
Some wholesalers said their cooking oil sales fell by a quarter last month due to rising prices.
These factors helped Indian retail inflation stay above the central bank’s comfort level of 6% for the second straight month in February, 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 will monitor crude oil and commodity prices ahead of its next monetary policy meeting in early April. However, markets are not expecting the Reserve Bank of India to change interest rates as it prioritizes growth.
This stance contrasts with global central banks, which have either raised interest rates or are considering doing so to curb inflation. For example, this week Federal Reserve policymakers called for big rate hikes in May.
Little relief is in sight for consumers.
The Confederation of All India Traders estimates that input costs for manufacturers of consumer durables and fast moving consumer goods (FMCG) will increase by a further 10% to 15% this month due to rising fuel prices, an expense that is expected to be passed on to the final consumer.
In Kolkata, vegetable seller Debashis Dhara said higher transport costs would push vegetable prices up another 5% this week. Its sales have already halved since February.
Indian companies Mother Dairy and Amul raised milk prices by almost 5% this month, while FMCG companies like Hindustan Unilever and Nestle are charging more for products like instant noodles, tea and coffee.
Broiler chicken prices have risen nearly 45% in six months this week to a record £145 a kg as key feed ingredients corn and soymeal have risen in price after supplies from the Black Sea region were hit.
Fertilizer prices have soared to a record $150 a ton since Russia, one of the biggest producers, rolled tanks and soldiers into Ukraine.
“It has become very difficult to manage our monthly budget,” said Archana Pawar, a homemaker in financial capital Mumbai. “This kind of price increase forces us to curb consumption.”