Cost of living rises in India as companies pass on higher prices

 Companies from the Indian units of Unilever Plc and Suzuki Motor Corp. to homegrown JSW Steel Ltd. are raising prices in response to the global supply squeeze

Indian manufacturers are running out of capacity to absorb rising input costs, with an increasing number passing it along to consumers in an economy already grappling with Asia’s third-fastest inflation and an uneven recovery. Companies from the Indian units of Unilever Plc and Suzuki Motor Corp. to homegrown JSW Steel Ltd. are raising prices in response to the global supply squeeze made worse by the surge in energy costs following Russia’s invasion of Ukraine. Higher retail fuel prices are also threatening to hurt demand just as the economy returned to its first full-year of growth after the pandemic-induced 6.6% contraction in the fiscal year ended March 2021.

Companies passing on costs will add to inflationary pressures, but the consumer price-targeting RBI has maintained that the current spike is supply driven and best dealt with by the government. Policy makers, who will meet this week to decide on interest rates, have signaled they may revise their 4.5% inflation forecast for fiscal 2023 but do little else to tighten settings for fear of hurting growth momentum.

“While not acknowledged by the central bank yet, there is telltale evidence of inflation likely being much higher,” said Kunal Kundu, an economist with Societe Generale GSC Pvt. That “can further imperil consumer confidence.” Consumers are key to the country’s economic recovery, with private consumption accounting for some 60% of India’s gross domestic product. To foster demand, the central bank will likely keep borrowing costs lower for longer.