Rupee's slide past 90 against the dollar is forcing consumer electronics, beauty, and car companies to consider price
hikes, potentially negating recent sales gains from GST cuts. Companies heavily reliant on imports are planning
increases of 3-7% due to rising component costs and a weaker rupee, with some hikes expected this month or next.
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The rupee’s slide past the crucial Rs 90 mark for the first time against the dollar may become the trigger for companies
across consumer electronics, beauty, and cars to raise prices. Such a step could reverse robust sales gains achieved in
these segments following the recent tax cuts.
Companies who rely heavily on imported parts or fully imported products are a worried lot. Many had held off price hike
plans despite rising raw material costs, fearing government scrutiny after the goods and services tax (GST) cuts with
effect from September 22.
Read more: As Rupee breaches 90, a look at who loses and who gains
Makers of smartphones, laptops, TVs, and large appliances said they will now raise prices by 3-7% from December–January.
This will help offset higher prices of memory chips, copper and other components due to the weaker rupee. Imported
inputs make up 30–70% of production costs in these categories.
“The whole (benefit) of GST rate cut will be wiped away by the rupee depreciation and increase in component prices,”
said Avneet Singh Marwah, chief executive at Super Plastronics, which manufactures Kodak, Thomson and Blaupunkt TVs.
“Prices of memory chips have gone up more than six times in the last four months. We fear demand may again take a hit
after the swift recovery aided by the GST cut,” said Marwah.
Industry executives emphasised they had benchmarked costs assuming the rupee would stay at 85-86 a dollar, but the sharp
breach to Rs 90 is forcing them to revise estimates. Many companies had delayed routine price revisions since October
despite rising commodity prices, concerned about accusations of profiteering post-GST.
Currently, companies have started informing retailers about the planned increases. While Havells has indicated a 3% rise
in LED TV prices, Super Plastronics will hike prices by 7-10% and Godrej Appliances by 5-7% in air-conditioners and
refrigerators from January.
A single-tier tightening in energy efficiency ratings from January will add pressure, they said. “The tightening in
energy rating norms and rupee depreciation will need a price correction from January. In case the rupee continues to
depreciate further, there may be another round in the March quarter,” said Kamal Nandi, business head at Godrej
Appliances. “Price reductions from the GST cut will be completely wiped out but there is no other option left.”
Consumer goods makers have told government officials privately that further absorption of rising costs is not
India’s fast-growing beauty segment led by global brands such as Shiseido, MAC, Bobbi Brown, Clinique and The Body Shop
may be impacted too, with their imported portfolios set to get costlier. In addition, GST on cosmetics has been kept
unchanged at 18%, besides lack of any buffer against such currency-driven cost spikes.
“A weaker rupee does increase our landed cost since a significant share of beauty products across fragrances, cosmetics
and skincare are imported and dollar-denominated,” said Biju Kassim, chief executive at Shoppers Stop Beauty. “For
distributors like Global SS Beauty, this creates margin pressure that becomes hard to sustain long-term unless partially
offset. We work closely with our global brand partners to optimise costs and hedge currency exposure, but some price
correction on high-end imported portfolios may eventually be unavoidable.”
The rupee’s depreciation is also threatening to derail recent demand momentum in vehicle sales, after companies cut
two-wheeler and car prices to pass on GST cuts benefits.
“We estimate the positive effect of the price drop on demand for luxury vehicles to gradually wean away in the mid- to
long-term, as prices of luxury cars will rise from current levels owing to deteriorating forex movement,” said Santosh
Iyer, managing director, Mercedes-Benz India. “We are mulling a price correction from January 26.”
Rival Audi India is also assessing options.
“The rupee depreciation impacts the company directly and fully, but as of now, the company has not decided on the price
increase or its quantum,” said Balbir Singh Dhillon, head of Audi India.
The Centre had cut GST on small cars and two-wheelers to 18% from 28–31%, reducing effective prices by 8.5–9.9% and
driving sales growth of 17% in October and 19% in November after a tepid first half of this fiscal year. But the
currency volatility could now erase that demand spike.
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