First, it was oil marketing companies who raised the prices of diesel and petrol on a daily basis now there is a possibility that food companies may increase the prices of daily-use consumer products. It is because of the shocking increase in crude oil price that you may see an increase in your grocery-bills in not too distant future. The products which can be most affected by the rise in international crude oil price are soap, detergents, packaged snacks, and cooking oils which may rise by 4-7 percent to counterbalance the rising transport and packaging costs. Not just that if the price of crude remains at existing levels then the chances of 4-5 percent increase in the prices in the next two quarters are quite good, according to Saugata Gupta, MD of Marico.
However, consumers may get a sigh of relief because many daily-use items have been shifted from the GST slot of 28 percent to 18 percent including detergents, shampoos, snacks, and deodorants etc. But, it doesn’t look like the deduction in GST will help consumers in their grocery bills since the rise in the crude oil price will directly affect the packaging materials as well. It is because of petroleum derivatives commonly used in packaging materials like tubes and bottles.
This year in March, the government had increased the import duties on crude from 30 percent to 44 percent and on refined palm oil, duties increased from 40 percent to 54 percent. By doing so, the Indian government is supporting local farmers and domestic manufacturing which will further help the country to minimize reliance on imports. Even still, the increase in customs duty will somehow directly impact the consumers.
On top of that, the daily-use consumer products which have some correlation with crude derivatives which will highly influence the grocery bills of consumers who are shopping for daily-use products like snacks, deodorants, detergents, soap, and among others. Detergents and soap may not have a direct correlation with crude derivatives but packaged snacks will certainly influence the increase in refined palm oil prices.
Final Thoughts: –
Some people may worry about their grocery bills but truth is, the rise in daily-use consumer products is not the main concern. The major concern here is “the impact of the rise in inflation on the economy due to higher prices.”
What’s freighting is, “it could lower the real disposable wages of households which can further hurt consumer discretionary demand.