India consumer giants hike prices as Middle East conflict drives costs

India's largest consumer companies are raising prices on detergents, toothpaste, tires, and paint ahead of the festival season, marking a second straight quarter of increases driven by higher commodity costs tied to the Middle East conflict.

Hindustan Unilever Ltd. will push through measured price increases on detergents and dishwashing bars over the coming quarter. At least seven other firms, including Dodla Dairy Ltd. and Asian Paints Ltd., plan similar moves, according to post-earnings calls and media briefings. Unilever PLC (UL), the parent, carries an AlphaScore of 60/100 reflecting a Moderate outlook in the Consumer Staples sector.

"Given the external volatility, we continue to see inflation in crude-linked derivatives and are taking calibrated price increases across the segment for home care products," Hindustan Unilever CFO Niranjan Gupta told analysts this week.

Consumer prices rose above the Reserve Bank of India's 4% target for the first time in nearly 18 months in June, driven by food and fuel costs. The gauge stayed within the RBI's 2%-6% tolerance band. Price pressures are expected to intensify. Companies are raising prices, and a deficient monsoon threatens higher food costs. The RBI expects inflation to average 5.1% in the fiscal year ending March 2027.

Persistently high energy costs after the Iran conflict mean no quick relief. With US-Iran tensions flaring again, firms are planning a second round of increases for home appliances and kitchen staples. Havells India Ltd. has raised prices by as much as 8%, while salt from Tata Consumer Products Ltd. is about 7% pricier.

The increases coincide with India's festival season, running from August to November. Consumer spending typically surges then, especially during Diwali. The period accounts for nearly a third of annual sales for many companies, raising the likelihood that stronger demand will let businesses pass on higher costs.

The price hikes test both the strength of India's consumption demand and its policymakers. The RBI has said it would respond only if inflationary pressures become more broad-based. India's finance ministry warned Wednesday that price pressures are spreading beyond food, with higher global fuel costs and unfavorable weather feeding through to a wider range of consumer prices.

The central bank has kept interest rates unchanged this year and is widely expected to do so again when its six-member monetary policy committee meets Aug. 3-5. Economists said the trajectory will depend on whether geopolitical tensions keep oil elevated and whether the monsoon damages the summer-sown crop harvest.

"Some price pass-through is inevitable, given the magnitude of input cost pressure and margin pressure on firms," said Sonal Varma, chief economist for Asia ex-Japan at Nomura Holdings Inc.

Demand has so far been stable across rural and urban India, according to company commentary. A Retailers Association of India survey showed retail sales grew 6% from a year earlier in June, higher than May.

"We are in a comfort zone at the moment," said Arvind Singhal, chairman of consultancy The Knowledge Company. Indicators including goods and services tax collections and highway toll receipts are also holding up, he said.

Still, companies are watching for any impact from the price increases and risks from the monsoon.

"While the demand has remained stable so far, the forecast of a below normal season, combined with El Niño risk is a reminder that consumption recovery in India rarely moves in a straight line," Ravi Kant Jaipuria, chairman at Devyani International Ltd., which runs KFC and Pizza Hut outlets in India, told analysts Wednesday.

The RBI's next policy decision on Aug. 3-5 will offer the clearest signal on how the central bank reads the balance between growth and inflation. The crude oil profile remains a key input given the conflict's effect on energy costs.