From airlines to chemicals: Iran war may deepen raw (material) wounds, leave India Inc bleeding

Core Insights - The ongoing conflict between the US-Israel and Iran is expected to disrupt supply chains and production, leading to increased raw material prices and cost pressures across various sectors [15] - Economists warn that rising energy costs and higher freight charges will contribute to inflationary pressures, particularly affecting oil marketing companies, fertilizers, ceramics, tiles, paints, tyres, chemicals, synthetic textiles, and airlines [15] Input Price Index - The input price index rose to a 15-month high of 54.7 in February from 52.5 in January, indicating expansion [3][15] - Rising costs of petrochemical-linked commodities, shipping, logistics, and insurance premiums, along with a weakening rupee, are expected to increase input costs across industries such as processed food, hospitality, textiles, and automotive manufacturing [6][15] Sector Vulnerability - Micro, small, and medium enterprises are identified as the most vulnerable to the ongoing conflict [15] - Sectors with high dependence on petroleum and natural gas, such as air transport (48.7%), trade (46.8%), and agriculture (10.3%), will face the greatest cost pressures [8][15] Wholesale Price Index (WPI) Trends - Wholesale inflation reached an 11-month high of 2.13% in February and is projected to rise further due to increased oil prices from the Gulf conflict [9][15] - Input materials like copper metal/rings (17.1%), aluminium powder (17.5%), and brass metal (24.1%) saw significant price increases in February [10][15] Future Projections - India Ratings and Research estimates WPI to reach a 37-month high of 3.7% in March, while HDFC Bank and IDFC First Bank forecast 3.6% and 3.5%, respectively [10][15] - Average WPI inflation for FY27 is projected at 4% by HDFC Bank and 5% by IDFC First Bank, with a potential 10% increase in crude oil prices pushing WPI higher by 100-150 basis points [11][15] Retail Impact - If current conditions persist, input cost increases may be passed on to consumers, with stronger household spending potentially allowing firms to transfer some costs while absorbing others through lower profit margins [12][15] - Retail inflation is expected to average 5% in 2026, with HDFC Bank projecting a rise of 70-100 basis points to 5-5.5% in FY27 [13][15]