West Asia conflict adds fresh cost pressures for India Inc

A prolonged conflict in West Asia is making cost management increasingly challenging for companies, as continued volatility in commodity prices, freight rates and currency movements leaves little room for planning, reported The Times of India. While higher input costs are expected to erode margins, businesses also fear repeated price hikes could weigh on discretionary consumer spending.

“For companies like ours, the biggest uncertainties stem from volatility in commodity prices/raw material costs, freight costs and shipping timelines, all of which can impact supply chain planning. It forces us to double down on execution, enforce cost-discipline and diversify sourcing,” said Shrikant Kanhere, MD & CEO at AWL Agri Business.

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Pricing products is becoming a challenge because there is no stability in rates, said Mayank Shah, chief marketing officer at Parle Products.

Continued uncertainty will push companies to postpone capital deployment weighing on fresh job additions and broader demand, said B. Thiagarajan, MD at Blue Star. “This whole FY will be strained. When costs go up, both margins and consumer demand get impacted,” Thiagarajan said. In their recent quarterly earnings, companies have said that commodity inflation continues to be a major headwind, projecting more price hikes going ahead.

“A protracted conflict in West Asia, alongside emerging El Nino conditions that may weaken monsoons and intensify heatwaves, could weigh on growth, inflation and current account,” ITC said, highlighting trade and supply chain disruptions in Q1.

Prolonged geopolitical conflicts may increase uncertainty for businesses in the short-term, said Ashok Nair, MD, RPG Life Sciences, adding that the firm’s continued expansion into new and emerging markets offers it some operational buffers. For consumers, supply chain volatility will translate into more price hikes across the board, potentially making festive shopping pricier. “.....if need be we will also make further pricing interventions because we’re also coming to terms with the exact inflationary impact on the margins,” said Ashish Goenka, group CFO at Tata Consumer Products in recent earnings call.

Mohit Malhotra, global CEO at Dabur India, said inflationary pressures are expected going forward.

(With inputs from TOI)