Input troubles

A significant spike in prices of key raw materials post lockdown has thrown a curveball at the revival story of India Inc

- SUMANT BANERJI

After an unprecedented year in 2020, India's manufacturing sector is already facing its first major challenge in 2021 — rising raw material prices. Since the economy started opening up in May last year, prices of key inputs such as steel, copper, aluminium, rubber, plastic and cement have gone up sharply.

Depending on the grade, prices of steel have shot up between 24 and 50 per cent. Since August, the average monthly price of hot rolled coil — a benchmark grade of the commodity — has risen by over ₹14,000 per tonne to ₹65,044 per tonne in December, a near 30 per cent jump. Similarly, copper prices have gone up by 25 per cent, rubber by 35 per cent and aluminium by 13 per cent. Prices of cement have grown at a more sedate pace, but over a much longer period of time — more than 16 per cent since January 2019.

Most of it is largely due to global factors. A strong rebound in China, the world’s second-largest economy and the largest consumer of base metals, created a demand-supply gap, pushing up prices of most commodities. Domestic prices have mirrored the trend, putting pressure on sectors ranging from automobiles and consumer appliances to housing and infrastructure. Most companies had to absorb part of the cost and pass on the rest to consumers at a time when overall economic recovery is still circumspect.

Since January 1, car and two-wheeler companies have hiked prices by 2-5 per cent, while consumer durable firms have increased prices of appliances, including television sets, washing machines, air conditioners and dish washers, by 3-4 per cent.