With the rupee depreciating by nearly 8 per cent against the U.S. dollar during the last one-and-a-half months, consumers may need to shell out more for home appliances and cars as the drop in rupee value has put pressure on costs of companies, forcing them to consider increasing the price of their products.
The move, however, experts feel, may not be good as the consumer sentiment is already low due to factors such as slowdown in the economy and high interest rates.
Rupee has tumbled from 53.67 against the greenback on May 1, to 57.99 on Thursday. It had closed at a record low of 58.15 to the dollar on Monday.
Consumer electronics majors such as Panasonic are mulling a hike in the prices of products across categories.
Panasonic India Managing Director Manish Sharma said, “At present, there is a rolling inventory for about 30 days in the market. However, after this window period, prices are likely to rise by 3 per cent if the rupee doesn’t recover.”
Echoing similar sentiments, LG India Managing Director Soon Kwon said, “We are closely monitoring the situation. If the rupee situation remains the same or further depreciates, it will definitely have an impact on pricing.”
Technology products maker BenQ India’s Country Head Rajeev Singh said, “We import everything into India, and our valuation is done in U.S. dollars. Therefore, the depreciation in rupee will definitely impact our landing cost. The rupee has depreciated by 7 per cent in the last four weeks. This kind of depreciation will push up the prices of our products. We have raised our prices by 2-3 per cent but if it continues to be this way, our prices may increase by 3-4 per cent by next month.”
Even the auto industry, which is already reeling under pressure , could be forced to pass on the burden to the consumer, in case the situation persists.
“Mercedes-Benz India is concerned over the weakening rupee and its volatility, as this will severely impact us. We are closely monitoring the developments regarding this. However, if this volatility of the currency continues, moving forward, we will have to reconsider price repositioning for some of our models,” Mercedes-Benz India Managing Director CEO Eberhard Kern said.
Rupee depreciation puts a lot of pressure on car manufacturers as many components are imported, a Honda spokesperson said.
“It is never an easy decision to increase the prices in the difficult market situation but car companies are left with no choice but to increase prices as they are not able to absorb the impact within themselves,” the spokesperson added.
Similarly, a source in luxury car maker Audi India said a price hike was inevitable in the current situation. The fall in rupee’s value had put a lot of pressure on the company, and the car maker was dwelling on the extent and time of hike in prices.
Carmaker Ford India is also monitoring the current trend.
“Input costs for our business have been trending upwards, including the impact of the depreciation of the rupee. We are closely monitoring these trends with a view to taking pricing action at the appropriate time,” Ford India Executive Director (Marketing, Sales and Service) Vinay Piparsani.
The hike in prices may also impact the mobile handset manufactures, many of whom either import some parts or the device.
Domestic handset manufacturer Lava said it was keeping a tab on the currency fluctuations and if the situation did not improve it would have to increase the prices of its products.
“Of course, this (fall in rupee’s value against the dollar) is a cause of concern. Our entire duty transaction is in dollar terms. We are not sure if we would be able to absorb the entire steep fall. We’ll watch for another fortnight and if the RBI does not intervene and things remain the same we’ll have no option but to pass on the burden to the consumer,” Lava co-founder and director S. N. Rai said.
Another handset maker Micromax said, “Yes indeed, it increases the input cost and hence puts a pressure on device sale price... We are carefully monitoring the situation and are hopefully expectant of the trend to reverse, however if not, like fuel prices, the device costs will also have to undergo price correction.”
On the other hand, the rupee’s downward spiral against the dollar may be good news for the $100 billion domestic IT-ITeS sector, which has been facing strong headwinds due to an uncertain global economy.
“The continuing depreciation of the rupee will generally be good news for the IT sector. Typically, a movement of one rupee in the dollar- rupee exchange rate will have an impact of 40 basis points on the U.S. portion of the revenue of an IT company,” PwC India Leader (Technology) Sanjay Dhawan said.