{"id":23617,"date":"2021-09-09T15:22:03","date_gmt":"2021-09-09T09:52:03","guid":{"rendered":"https:\/\/plyinsight.com\/?p=23617"},"modified":"2021-10-02T16:26:48","modified_gmt":"2021-10-02T10:56:48","slug":"big-firms-pass-on-input-costs-to-consumers-smaller-ones-struggle","status":"publish","type":"post","link":"https:\/\/plyinsight.com\/hi\/big-firms-pass-on-input-costs-to-consumers-smaller-ones-struggle\/","title":{"rendered":"Big firms pass on input costs to consumers, smaller ones struggle"},"content":{"rendered":"
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While companies in India grapple with rising input costs, only the bigger ones appear in a position to pass them on to consumers. Low demand is preventing medium and smaller ones from doing so, and this is borne out by the wholesale price index (WPI)-based data.<\/strong><\/span><\/p>\n

WPI inflation eased to a three-month low in July, but was still at an elevated level of 11.16 per cent. However, inflation in manufactured items rose to 11.20 per cent from 10.88 per cent in the previous month. It was in double digits for three consecutive months and stood at 9.44 per cent in April.<\/p>\n

India ratings said in a note that since fuel prices are a cost of almost all manufacturing sectors\u2019, either directly or indirectly, higher fuel inflation raises input costs across the board. In addition to fuel cost, the basic cost of raw material, intermediate goods and wages pushes prices up and, in turn, inflation of the manufactured products.<\/p>\n

While medium, small and micro enterprises (MSMEs) find it difficult to pass on these high input costs to their consumers, big industries are shifting the burden to consumers; smaller players are, instead, resorting to cutting down wage and other bills.<\/p>\n

\u201cTwo stories are playing out. Large, organized manufacturers \u00a0\u00a0are not only increasing their footprint at the cost of the marginalization of the MSME sector, but they are also increasingly adding the rising input cost to the output cost.\u201d The Reserve Bank of India\u2019s (RBI\u2019s) latest industrial outlook survey, indicates that big companies likely to continue doing so in the near term as demand normalizes.<\/p>\n

MSMEs and unorganized firms are, in the other hand, unable to pass on the input cost for fear of losing the market. \u201cThey are under so much duress that they are left with zero risk-taking capacity. So, marginal players are trying to play safe but it is eroding their viability,\u201d Large players in the organized manufacturing sector do not face such a predicament and are, therefore, willing to pass on the rising input costs to the consumers,\u201d<\/strong><\/span><\/p>\n

Elevated input costs have created a jingle at a time when the domestic demand recovery remains tentative. \u201cSmall players have been able to pass on some price increases to protect their margins to an extent. However, smaller entities, which have been hit by the disruption caused by the first and second Covid waves, may not have the pricing power.<\/strong><\/span><\/p>\n

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