Bitter truth: Surge in sugar prices to push up festival budgets

New Delhi: Sweets, candies and desserts are getting costlier during the ongoing festive season, raising the cost of celebrations and gifting for consumers. Higher sugar prices and costs of other key inputs are fuelling the increase, putting pressure on manufacturers as festive demand picks up.

Prices are likely to remain elevated in the coming months, with the outlook depending on the pace of fresh sugar supplies and the trajectory of input costs, according to experts. Inflation in sugar, confectionery and desserts surged to 13.8% year-on-year in September, up from 10.9% in August and 3.4% in January, according to the statistics and programme implementation ministry data. Sugar prices shot up 29.8% year-on-year in September from 24.3% in August. "The rise reflects higher input costs across key raw materials, including sugar," said Poonam Upadhyay, director, Crisil Ratings. Festive demand has added to these pressures, she added.

Inflation in prepared sweets (non-milk-based) accelerated to 9.4% in September from 7.3% in August, while candy prices rose 11.5%, up from 6% in the previous month. Inflation in ready-made food and other food products edged up to 10% from 9.6%, and in namkeen to 3.4% from 3%. Higher sugar prices, along with rising edible oil and fuel costs, are driving inflation across these categories, said Devendra Pant, chief economist at Ind-Ra. The increase in sugar prices has been driven by lower production, monsoon-related factors and strong demand, he added.

The price rise comes as India enters a busy festive period. The festive calendar gathers pace in October with Navratri, Durga Puja and Dussehra before peaking around Diwali, driving demand for sweets, confectionery and snacks. "Festive purchases of sweets are largely driven by tradition and cultural preferences, which should support demand, although consumers may become more value-conscious if prices remain elevated," said Upadhyay. The cost of dry fruits, another key ingredient in festive sweets, has also risen. Cashew nut prices increased 4% year-on-year in September, while raisins (kishmish) and munakka recorded inflation of 10.4%.

Overall, food inflation rose to 7.7% y-o-y from 6% in August, while retail inflation increased to 5.54% from 4.8%. Food prices may remain firm in coming months as uneven rainfall threatens farm output. Higher inflation, particularly in food, could weigh on consumer demand, said Pant.

The upcoming sugarcane crushing season could improve availability, but the extent and timing of any price moderation will depend on how quickly fresh supplies reach markets and on actual sugar output, Upadhyay said, adding that concerns over cane yields following weak rainfall could affect production. Manufacturers are likely to focus on balancing rising input costs with consumer affordability through operational efficiencies and calibrated pricing actions to limit the impact on demand, she added.