India Inc Adapts to Rising Costs Amid Escalating Tensions with Iran

India's Consumer Goods Sector Faces Pressure Amid Rising Costs

The Indian consumer goods sector is facing a perfect storm of surging oil, freight, and insurance costs, as well as strained household budgets, forcing companies to scramble to protect their margins. The U.S.-Israeli war on Iran has disrupted trade routes and lifted input costs globally, hitting import-reliant economies like India harder, where a weaker rupee is adding to inflation and complicating pricing decisions as demand remains uneven.

India is considered one of the world's most vulnerable countries, according to economist Jayati Ghosh, who warns that higher oil and fertiliser costs, weaker Gulf demand, softer remittances, and potential capital outflows could stoke inflation and slow growth. As a result, several Indian companies have already rolled out low- to mid-single-digit price hikes across categories.

Key Players in the Industry

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Pricing power remains weak in mass segments, with companies holding the line on 10- to 20-rupee packs and shrinking product sizes instead of raising prices outright. "We are reducing grammage because we can't breach those price points," said Mohit Malhotra, global CEO at Dabur.

Automakers, including Maruti Suzuki, Mahindra & Mahindra, Tata Motors Passenger Vehicles, and Hyundai Motor India, have also hiked prices. "We were left with no choice," said Partho Banerjee, Maruti's senior executive officer for marketing and sales, adding that raising prices was not good for customers, especially first-time buyers.

Airlines IndiGo and Air India are trimming capacity, especially on fuel-heavy international routes, and increasing fares to offset higher aviation fuel costs. Consumers are feeling the squeeze, with many watching their spending as prices rise for almost everything, from travel to packaged food.

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Cost-Cutting Measures

With limited room to pass on costs, companies are turning inward and cutting costs to cushion margins. Hindustan Unilever has cut advertising spend, while others are trimming non-essential travel and marketing costs. "The scope for further cost-cutting is gradually narrowing," Axis Direct analyst Uttam Kumar Srimal said, adding that prolonged commodity and fuel inflation could force sharper price hikes or margin hits.

Firms are also reworking supply chains to manage disruptions. Companies with Middle East exposure are rerouting shipments, diversifying sourcing, and shifting production. Dabur is using alternative routes via Egypt and Turkey, while Britannia is bringing some production back home.

Supply Chain Reset

"My priority is not to take prices up," said Umashan Naidoo, head of customer and beauty at Trent, which offers Gen-Z-focused affordable trendwear through its brand Zudio.