- The Indian government recently announced an export ban on wheat, disregarding its position from the week before.
- It added restrictions on sugar exports and exempted import duties on palm oil, which could cool the rising prices of raw materials for packaged foods.
- This could provide much-needed relief to FMCG companies such as:
HUL† ITCand Britanniasay experts, among others.
The Indian government appears determined to curb inflation with interventions such as a wheat export ban, restrictions on sugar exports, and duty-free palm oil imports and more.
Aside from lightening the burden on grocery bills, the moves can help FMCG giants such as:
While inflation is a phenomenon where the prices of goods and services rise, stagflation takes inflation and combines it with slow economic growth and high unemployment. Imagine high prices on everything and remember that your income doesn’t keep up – you are essentially making less money than before.
Packaged food companies such as Nestle and Britannia get a postponement
However, analysts welcome the government’s decision and say it will bring much-needed calm to packaged food companies such as Nestle and Britannia.
Wheat, sugar and palm oil account for 40-60% of the total cost of raw materials needed to make biscuits, noodles, bread and drinks, among other things.
“Packaged food companies have faced hyperinflation in the ready-to-eat basket as international prices for most commodities reached historically high levels following the Russia-Ukraine war and the imposition of the Indonesian government’s export ban on palm oil last month. remained,” Naveen Kulkarni, the chief investment officer at Axis Securities, told http://gotechbusiness.com/.
This, combined with Indonesia’s
decision Lifting the ban on palm oil exports is expected to provide immediate relief to Hindustan Unilever and Godrej Consumer, Kulkarni explained, stating that palm oil accounts for 20-25% of these companies’ raw material costs.
However, it is worth noting that the decision to ban wheat exports is a preventative measure, designed to prevent wheat prices in the country from rising. An unintended outcome of this could be a rise in the price of wheat alternatives such as rice, said Sonal Varma, chief economist for India at Nomura. “The impact of the wheat export ban on India’s domestic food inflation is likely to be dampened. But as domestic wheat production is likely to be curtailed by the heat wave, local wheat prices may not moderate materially,” she said.
As a consequence, this step may have consequences for farmers’ incomes. “With domestic grain price inflation still rising, the current export ban could also be lengthy, if global food prices remain elevated,” Varma added.
It appears that the government has heeded the warnings of the top executives of the Indian FMCG giants. Will it pay off or not, only time will tell. Until then, brace yourself.
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