By Tasneem Bandukwala
The Indian rupee has hit a new low, crossing the ₹90 per US dollar mark. This means that imported components and products are set to become more expensive and consumers are bound to suffer. This expected price hike could undo the boost in sales that several sectors enjoyed after the recent tax cuts.
Companies will have to pay more in rupees for the same dollar-priced inputs due to products becoming more expensive in sectors such as electronics, automobiles, beauty, etc.
Manufacturers and companies that depend on imported parts are now thinking of raising the prices of their products by about 3–7%, and in some cases even more. They need to do this because their own costs have gone up, and increasing prices is the only way for them to make up for those higher expenses.
Avneet Singh Marwah, chief executive at Super Plastronics, said, “The advantages of reduced GST rates will be nullified by currency devaluation and increasing component costs.”
The new round of price hikes could erase the small relief that consumers felt recently from tax cuts, including lower GST rates. Items that had recently become more affordable, such as smartphones, home appliances and cars, may end up costing more once again.
This means that whatever people may have saved earlier might disappear as companies raise their prices to offset higher costs.
These manufacturers and companies are planning to raise the prices of their products by about 3-7% starting December-January, and in some cases even higher. They’re being forced to do this because their own expenses have gone up as buying parts, raw materials, or finished goods from other countries now costs more due to the weak rupee. To make sure they don’t face losses, they plan to pass some of this extra cost on to consumers through higher retail prices.
The falling value of the rupee puts extra pressure on prices, which can push overall inflation higher. When everyday goods become more expensive, people may start cutting back on their purchases. This means they might delay buying things like phones, appliances or cars. As a result, the strong sales growth many industries enjoyed after the recent tax cuts could slow down, because higher prices often make consumers more careful about spending.