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Inflation crimps Indian firms as rural millions cut spending

May 21, 2022 00:00:00


Surging inflation is forcing many poor Indians to rein in spending, threatening a slowdown for companies such as Godrej Appliances which saw bumper sales as recently as March and April after a brutal heatwave spiked demand for its cooling products, reports reuters.

The Ukraine crisis and global supply chain disruptions have stoked prices worldwide, but people in developing countries such as India are more vulnerable to even small cost increases that can wreck their meagre budgets.

"From May we started seeing a drop in demand," Kamal Nandi, the business head of Godrej Appliances, one of India's largest makers of home appliances, told Reuters. "These are early signs of inflationary impact on discretionary spends."

The fall came swiftly after demand from the mass segment had "zoomed up" in March, and stayed good in April, he added.

April saw India's wholesale and consumer prices accelerate at their fastest in years, prompting the central bank to hike interest rates at an unscheduled policy meeting this month, with another likely next month.

Godrej, which made India's first domestic refrigerator in 1958, aims to raise prices when possible to offset commodity costs, but worries that could erode demand in the countryside home to two-thirds of India's population of nearly 1.4 billion.

"Going forward, every quarter there has to be a price hike and that will impact demand down the line," added Nandi, who said hikes in the prices of commodities had far outstripped sticker prices.


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