The Impact of A 5-Month High Retail Inflation on Consumers in India

As food items and retail prices take to the air, consumers are experiencing an added burden on their pockets.

In September 2022, retail inflation rose to 7.41 percent and has remained above the RBI’s upper limit of 6 percent. Inflation expectations influence the decision of households and businesses for future economic activity. As producers battle the high inflation costs, it trickles down to the consumers as surged prices. The current economic graph is bound to impact the spending power of the average India household. We can expect a shift in the allocation of resources, however, the impact of inflation may vary across households depending on their consumption patterns.

As a legacy brand, Vinod Cookware today still strives to acquire untapped markets and strengthen our existing customer base. In light of previous economic trends, the goal has always been to derive maximum consumer satisfaction. It is imperative to retain the trust of customers by availing of affordable pricing options and tactical seasonal launches. Over the past years, the retail industry has been tested by unavoidable hits before, the pandemic being the toughest challenge for global markets across the world. However, business owners in several industries have continued to strive for their presence in the market even in testing times.

We can expect a strain on the entry-level cookware segment, as it has a negative impact on sales, owing to high inflation. On the other hand, while the premium segment continues to increase at a slow yet steady rate, entry-level retailers are under pressure.

Impact of inflation on the economy

Food inflation, accounting for nearly half the CPI basket, soared at 8.60% in September 2022, against 7.62% in August. On the other hand, we notice a decrease in industrial growth, as measured by the Index of Industrial Production, which contracted to 0.8% in August in comparison to 2.4% in July, as per data shared by the NSO.

India has stayed resilient amid high inflation rates, increasing prices, and currency swings in the past years. In an inflation surge, trends driving it and business implications result in a shift in consumer behavior. We can expect a decline in the consumer demand for goods produced by emerging market players. On the other hand, Indian legacy and homegrown brands like Vinod Cookware will display a stronger dominance in capturing their market share. More importantly, imports are costlier after the 10% depreciation of India’s Rupee against the Dollar, this year. Hence, a higher portion of consumers would reconsider indigenous and domestic brands for their purchases. Better standards of living and value-for-money ideology in the economy would give the premium-level sector an upper hand in times of such  market distress.

The creeping inflation will affect the overall economy, challenging the consumer’s purchasing power. It would also affect retailers’ margins as, during inflation, production hasn’t lowered but is expected to increase drastically entering the next financial quarter. As a top player in the cookware industry, we, at Vinod Cookware, are taking measures to analyze factors that could be a threat in the future. The results will help us find a solution to such obstacles and enhance the trust our customers have shown for 60 years now.

Certainty of another inflation hike

After the disruption caused by the uncomfortable inflation print of 7.4% for September 2022, another hike is foreseen in the December 2022 MPC review. The quantum of the next time is heavily dependent on how much the inflation print receded in October 2022, as well as, the GDP growth for Q2 FY23.

Indian households were in the path of recovery after witnessing the COVID-19 pandemic-related economic shocks. This indicates that the Central Bank would need to take more aggressive action and mirror the successful policy path of major Central Banks in the West- tackle inflation and potential recession at any cost.

The article is authored by Sunil Agarwal, Director, Vinod Cookware

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