Snacks, health bills, electricity bills and more will add to your chunkier home loan EMIs

• Sunflower oil prices are going up due to supply disruption and its cheaper option palm oil is pricier too due to an export ban by Indonesia.
  
• The Indian government allowed pharmacos to hike prices of 800 generic medicines by as much as 10%, adding to healthcare costs.
  
• State governments proposed hikes in electricity tariffs which might come in sharper and higher due to the crises.
  
• Kerosene prices also increased sharply in April, affecting the most economically vulnerable communities.
  

Long before India’s central bank made the surprise move to tame inflation, Indians have been grumbling about petrol and diesel prices, spiked by the onset of Russia-Ukraine war driving crude oil prices above $100 a barrel.

But that’s not the only price hike that the central bank governor was worried about before he called an emergency meeting that culminated into a sudden interest rate hike. Higher fuel prices add to the transport costs of most food as well as non-food products.

Pricier snacks, oil, wheat and medicines

Then, there is another oil that’s more important for Indians than motor fuel --- cooking oil. “Prices of edible oils may firm up further due to export restrictions by key producing countries and the loss of sunflower oil output due to the war,” said Shaktikanta Das, the governor of Reserve Bank of India (RBI) on May 5, in a statement.

Householders trying to shift to the cheaper option of palm oil would also be disappointed too. Palm oil prices have been going up after Indonesia banned its exports. Input cost prices pressures would make snacking too an expensive affair.

“The risks of unprecedented input cost pressures translating into yet another round of price increases for processed food,” said Das. Top FMCG players like Hindustan Unilever, Britannia, Nestle and Coke have already hiked prices ranging from 3-10% across the wide product range. Higher feed costs are driving the prices of milk, diary, poultry and other meats.


Since inflation is an international problem, even products which see no supply disruptions in India – like wheat – are also firming up due to a rise in global prices. A Barclays research report predicts that food inflation might touch 7.8% in April - which would lead to another round of interest rate corrections by the central bank.

The second most unavoidable cost is healthcare - will also dent home budgets since the government allowed pharma companies to hike prices by 10% for generic medicines. This hike will affect 800 formulations covering major medicine groups like painkillers, antibiotics, cardiac medicines and more.

Higher energy bills

The good news on this front is that the government is trying to compel power companies to export more coal to ensure there are no power cuts. The bad news is that this might put more pressure on power generators and also power distributors who are already in deep financial crises of their own.

“Revisions in electricity tariffs also likely pushed up power costs in some states, though a planned reduction in tariffs in Punjab should provide some relief in coming months,” said a research report on inflation by Barclays.

“We expect this trend to continue through the year, as many state governments implement proposed power price revisions to support the distribution companies, under the union government’s reform directive,” the report added, hinting at a difficult few months ahead.

Kerosene prices also increased sharply in April, as an after-effect of international oil prices – affecting the most economically vulnerable communities. The middle class too is reeling from the rising cooking gas prices which have been hiked several times in the last three months. A 14.2 kg cylinder now costs over Rs 1,000 in several cities, creating as much political heat as much as domestic stress.

Home loan EMIs all set to rise

Many experts believe that the central bank will raise the interest rates - the rate at which it lends to the banks - a few more times in the coming months. The rate is now at 4.40% allowing most people to bear the burden of home loan EMIs at a benign interest rate.

“This (interest rate) hike signals an imminent end to the all-time low interest regime, which has been one of the major drivers behind home sales across the country since the pandemic began,” said Anuj Puri, chairman of Anarock group.

Particularly, new home buyers who have been banking on lower EMI outgo will face more stress for a long time to come, as low interest rates are unlikely to come back anytime soon. By the Central Bank’s own assessment, it will take another 12 years for India to overcome Covid-19 losses.

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