In April this year, industrial belts across Delhi and the National Capital Region witnessed a wave of labor protests that disrupted operations and prompted several states to review their minimum wages. The demonstrations, driven by long hours, low wages and poor working conditions, were intensified by workers’ anger at persistently high inflation and sharp rises in cooking gas prices, which further eroded the purchasing power of already meager wages.
As the West Asian war affected energy and fuel supplies, cooking gas prices rose to more than Rs 500 per kg, and the cost of a cylinder reached thousands on the black market.
While this was seen as a one-off issue, over the past few months, the cost of the war in West Asia has begun to seep into household budgets. Not only did cooking gas prices rise, but the prices of a range of household items rose, from fuel and basic items such as milk, dairy products and biscuits to detergents and consumer goods such as air conditioners. Milk prices increased by 2 pounds per liter. HUL has hiked detergent prices by 5-11%. Britannia has indicated imminent price hikes to offset a 20% rise in fuel and packaging costs, while Dabur has raised prices across its oral care and hair care portfolio. These are just a few examples.
Away from Delhi and the National Capital Region, in Mumbai, retired housewife Rupali Sheth points out that prices of everyday household essentials have risen in the past few months. However, the 70-year-old says the prices have not affected her significantly and she is not looking to cut back on spending.
Back in the capital, in Delhi, Pooja, 42, who works as a chef, says the biggest impact on her monthly budget has come from the price of cooking gas – a 14.2kg cylinder costs Rs 942. “The prices of almost everything have gone up in the last few months but there is no choice. We used to save a few thousand rupees every month, but now we don’t save much,” she says.
Back home, people in her village in western UP are becoming more cautious about unnecessary expenses. “It has been raining intermittently, but everyone has heard that the rains may not be very good this year. So, they have to be careful about spending. If the crops fail, their investments (in farms) and their entire profits for the year will be wiped out,” she says.
It seems that consumers, regardless of their income levels, are feeling the crisis. This may continue at least for the next few months, as a combination of the West Asian crisis and low rainfall combined with job cuts and uncertainty over salary increases makes them wary of overspending. This applies to both urban and rural families.
For low- to moderate-income households, groceries, fruits and vegetables take up between 35 and 60% of the monthly budget, which price increases tend to have a major impact on.
-Suresh Sadagopan, Founder of Ladder7 Financial Consulting
But the effect varies from one income to another. Suresh Sadgopan, Founder, Ladder7 Financial Advisories, explains this and says that typically in upper middle class households, groceries, fruits and vegetables consume less than 20% of the monthly bill. “In times of high inflation or a sudden increase in the prices of certain food items, the impact on these households is usually minimal. However, for low- to moderate-income households, groceries, fruits and vegetables consume between 35 to 60% of the monthly budget on which such a rise in prices tends to have a significant impact.”
While people generally tend to complain about rising prices, Sadagopan says that in recent months, there have been instances where customers were unsure whether they would still get a job in the next three to six months due to issues such as technological changes and artificial intelligence. “Job losses definitely happen,” he points out.
This was also pointed out by Manish Tiwari, Chairman and Managing Director, Nestlé India at the City India 2026 conference in early June, where he noted that although consumption growth in India remains healthy, the urban middle class is facing inflationary pressures while real earnings have not kept pace.
Prices are rising
Recent comments and data also show that prices are rising even though energy costs are now lower due to the interim peace agreement in West Asia.
Retail inflation measured by the Consumer Price Index breached the Reserve Bank of India’s 4% target in June and rose to 4.38% with inflation in the food and beverage basket rising to 5.05%.
The center has begun passing on higher global energy prices to consumers. Heat waves and then monsoons also led to an increase in the prices of some basic commodities. For example, ginger and tomatoes were among the top five items that saw the highest inflation rate in June.
Forward-looking surveys by the Reserve Bank of India also show weakness in consumer sentiment and a slight rise in inflationary expectations. In the latest surveys conducted in May, consumer confidence in urban and rural areas weakened while household inflation expectations rose for the next three months, as well as the one-year period.
Reports indicate mixed trends in terms of pricing. A recent report by brokerage Equirus Securities on raw material input prices for fast-moving consumer goods said: “Input cost trends remain mixed, with agricultural commodities largely stable, beverage inputs seeing mixed trends, edible oils remaining elevated, and crude oil-related packaging costs declining sequentially.”
The report said food and beverage players remain relatively better off, supported by stable grain prices, lower costs of coffee, cocoa, and fine copra, although higher prices for soybeans, edible oils and dairy inputs remain mainly watchable. Home and personal care workers continue to face input cost pressures.
As crude oil prices fell in between, prices for the main input – plastic packaging – began to fall as well.
“During the beginning of the war, crude oil prices rose significantly, leading to a sharp increase not only in raw material costs for packaging but also in many other input costs across the value chain. This resulted in an escalation of the overall cost for fast-moving consumer goods companies. However, as the situation stabilized and crude oil prices declined in recent weeks, input costs began to decline,” explains Thimmaya Nabandha B, CEO and MD of Alternicq, a rigid plastic packaging company.
The government has now reduced prices of commercial LPG and aviation turbine fuel, but it is uncertain when the impact will trickle down to retail consumers of diesel and petrol as well as domestic LPG cylinders.
Most analysts expect inflation to average between 5% and 5.2% this fiscal year, which is in line with the Reserve Bank of India’s forecast of 5.1%, but they expect some positive impact from lower energy prices. However, they warned of the need to monitor the impact of rain on food prices.
Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, says they estimate average inflation at 5%, with some mitigation from fears of lower crude oil prices and a stabilizing Indian rupee.
We at Kotak Mahindra Bank estimate average inflation at 5%, with some mitigation from concerns arising from lower crude oil prices and a stable Indian rupee.
-Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank
Demand is steady at the moment
To date, consumer demand has remained not only steady but strong. Businesses and policymakers have highlighted that consumers appear to have ignored the impact of the war. Demand indicators such as GST collection, bank credit and factory production have shown resilience and indicated firm private demand.
India’s economic growth depends heavily on its domestic market, with private consumption acting as a key driver. Private final consumer spending grew by 7.7% in FY26 and was one of the key drivers of growth in the last fiscal, supported by GST and income tax cuts when the US-imposed 50% tariffs on Indian exports were seen as a major risk.
“Overall, the high-frequency indicators show broad-based resilience in economic activity during the first quarter of FY27,” the Ministry of Finance said in its June 2026 monthly economic review, noting that while some indicators point to a moderation in momentum, domestic demand conditions remain supportive. However, it is hoped that the recent cooling of geopolitical tensions in West Asia will improve global risk sentiment, ease commodity price pressures, and support domestic economic activity.
Analysts also believe that Indian companies continued to perform well in the first quarter of fiscal 2027 on the back of strong consumer demand.
Naveen Trivedi, Executive Director, Institutional Research – Consumer Sector at Motilal Oswal Financial Services, echoes this sentiment. “While many companies have raised prices, consumer demand has remained strong across all sectors,” he says. “Even in jewellery, major players continue to perform well, and the tariff hike has been moderated by a correction in global gold prices.”
Kashyap Jhaveri, fund manager and head of research at Emkay Investment Managers, agrees and says that despite the turmoil in West Asia, aggregate demand appears to have been unaffected.
Pockets of anxiety
It is very possible that this situation will be diminished by a spell of bad monsoons. After what was the fifth driest June since 1901 with a 40% rainfall deficit, India is expected to see below-average rainfall in July with super El Niño conditions likely to intensify. The rainfall deficit is now 18%.
Bhardwaj warns of the need to monitor the risks resulting from a weak monsoon. “Although the negative impact of El Niño in the past has not been very decisive, any sustained rise in food inflation could raise inflationary expectations. Overall, demand in rural areas may be harmed if food shocks occur,” she says.
Pockets of anxiety can already be seen. “Even before the onset of monsoon season, demand in rural areas seems to have gone off its peak, as seen in the growth in tractor sales as well as the growth in two-wheeler sales,” a recent report by QuantEco Research said.
A potential interest rate hike by the Reserve Bank of India later this year of 25 to 50 basis points would worsen urban consumption. Even before that, housing sales fell by 6% from April to June 2026 in seven major cities, Anarock data revealed.
But the coming months will reveal exactly how families fare amid these challenges and whether they choose to cut expenses.
Motilal Oswal’s Trivedi also says that one has to see what happens to demand in the second quarter of the fiscal.
Emkay’s Jhaveri points out that a prolonged inflation scenario could be worrying, but it does not appear to be the case at the moment. “We have now seen over the last several years that floods or temperature fluctuations have a greater negative impact on foodgrain production than below-normal rainfall. Hence, we would not be too concerned about inflation in food products. However, one month of below-average rainfall means that reservoirs may emerge below the LPA storage level for the Rabi season,” he says.
But in a year when the economy is already reeling from the effects of the West Asian war and life is expected to return to normal in only the next six months, expectations were pinned on Indian consumers to power the growth engine for another year. With the monsoon forecast uncertain, the question now is whether their pockets are deep enough to support it.
@surabhi_prasad
