Businesses Should Be Prepared For Higher Inflation In Next 2-3 Years, Says FMCG Giant HUL¡¯s CEO

Amidst the soaring inflation levels biting the economies of countries around the world and recession fears looming over, FMCG giant HUL's (Hindustan Unilever Ltd) CEO has issued a warning for businesses. He says that businesses need to be prepared for possibilities of a continued or higher inflation and deflation of commodity prices in the next two to three years, HUL CEO and MD Sanjiv Mehta said yesterday.

The unprecedented inflation is not homegrown but has been caused by several global factors, including supply chain disruption due to the pandemic and Ukraine-Russia war, HUL CEO said while speaking at the FICCI LEADS 2022 event in Delhi, as per PTI.

"It is very difficult to predict but I think where we have to be ready with is possible three scenarios in the world today," he said when asked about his thoughts on the possibility of inflation coming down in the near future.

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¡°One possibility is the inflation or a slight deflation will continue at a moderated pace from the elevated base today. The second is it could go up even further and the third is there could be a deflation in commodity prices."

"This is a horizon I'm looking at for the next two, three years and as businesses, we have to be ready for each of the three scenarios."

HUL CEO Mehta also said a big difference in the elevated levels of inflation this time is that earlier it used to be in one or two commodities but "this time, it has been across a range of commodities. That is the reason why it's become a massive global issue".

CEO Mehta added that global supply chain disruptions caused by COVID-19, the huge amount of fiscal spending, especially in many developed countries, and the war in Ukraine and its impact on energy prices are the main reasons for high inflation. He also said that every country is looking at energy security and an increase in production could have a dampening effect on inflation.

Besides, "If the war between Russia and Ukraine was to settle down, there could be an immediate impact on energy prices. Then it could result into, very clearly, an impact on other commodities and all and also come down", the FMCG giant¡¯s MD & CEO added.

Warning Of Further Price Hikes

After declaring its financial results for the April-June quarter in July 2022, India's largest consumer goods maker HUL had warned about further price hikes by mentioning that high inflation will dent its margins in the current quarter (July-Sept) and could result in higher prices of its products. HUL had mentioned that it expects margins to remain under pressure in the September quarter and growth to be driven by price hikes.

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Signs Of Inflation Easing?

As per the report, although the WPI (Wholesale price index)-based inflation declined for three consecutive months, it remained in double digits for 17 months beginning April last year.

The wholesale price-based inflation had eased to an 11-month low of 12.41% in August, on softening in prices of manufactured and fuel products, even as food items remained expensive.

The inflation was 13.93% in July and 11.64% in August last year. It had touched a record high of 15.88% in May this year. Now, it remains to be seen how inflation levels turn out in the coming months, and whether the common man gets to breathe a sigh of relief or not.

India's central bank, the RBI, too had signalled the easing of inflation, as July's Bulletin by the RBI staff mentioned that the pace of the rise in prices in India is on the back foot and the ¡°worst of inflation may be behind us.¡±

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