Title: Inflation crimps Indian firms as rural millions cut spending

May 20, 2022 03:15AM ET

By: AnalysisWatch

Rising inflation is forcing many poor Indians to cut back on spending, threatening companies like Godrej Appliances, which saw record sales as recently as March and April after a brutal heat wave drove up demand for its refrigeration products.

The Ukraine crisis and disruption to the global supply chain have driven up prices around the world, but people in developing countries like India are more vulnerable to even small price increases that can blow their meager budgets.

The price drop came quickly after demand in the bulk segment surged in March and remained good in April, he added.

Indian wholesale and consumer prices rose at the fastest pace in years, prompting the central bank to raise interest rates at an unscheduled meeting this month, and another meeting is likely next month.

Godrej, which made India's first refrigerator in 1958, plans to raise prices if possible to offset the cost of raw materials, but fears that could hurt rural demand, where two-thirds of India's nearly 1.4 billion people live.

In an earnings call this month, Dabur India Ltd, a big seller of everything from shampoos and toothpaste to honey and fruit juices, said in an earnings call this month that demand is likely to remain weak in coming quarters.

Hindustan Unilever Ltd, owner of brands seen everywhere in India such as Dove, Vaseline, and Horlicks, said late last month that sales are falling fast, especially in rural areas.

Inflation will be a major headache for Prime Minister Narendra Modi's government ahead of assembly elections in several Indian states this year and early next, particularly in his western home state of Gujarat.

However, demand in Indian cities has held up much better, according to several companies.