From edible oils to paints, cost shocks ripple through consumer sector amid West Asia tensions

India’s consumer products and retail sector is staring at a prolonged period of cost pressure and demand uncertainty as the ongoing West Asia conflict begins to ripple through the economy, according to an analysis by EY India.

The impact, while initially visible in crude oil prices, is expected to play out more broadly over the next eight quarters, affecting costs, consumption patterns and investment decisions across the sector.

“The conflict is expected to influence costs, demand, and capital allocation decisions across the consumer ecosystem,” said Angshuman Bhattacharya, partner and national leader, consumer products and retail, EY India. “This has implications for pricing, household consumption, and overall investment sentiment.”

At the heart of the disruption is crude oil. Rising prices are pushing up packaging and transportation costs, while a weakening rupee is making imports more expensive. Supply chain constraints are compounding the problem, driving up commodity prices and freight costs, and adding volatility to an already strained operating environment.

The pressure is not just limited to companies. Employment concerns in export-linked sectors, coupled with a potential squeeze in remittances and rising inflation, are expected to dampen consumer sentiment. This could translate into slower household consumption in the coming quarters.

Companies to recalibrate as costs rise

FMCG companies are already feeling the heat. Edible oil inflation, a key concern for the sector, has crossed 7% in early 2026. India imports nearly 57% of its edible oil requirements, including palm, soybean and sunflower oil, making domestic prices highly sensitive to global disruptions. Companies that rely heavily on palm oil, such as snacks and packaged food makers, are facing margin pressure.

Packaging costs are also rising, driven by higher prices of crude-linked inputs such as plastic and aluminium. As a result, companies may resort to price hikes or reduce pack sizes, a trend often referred to as shrinkflation. Consumers, in turn, are likely to shift towards lower-priced alternatives.

“Profitability pressures from rising input costs are likely to make companies more conservative in their spending, including short-term marketing investments and capital expenditure,” Bhattacharya said.

In personal care, the reliance on petrochemical derivatives such as surfactants, silicone oils and fragrances is creating cost inflation and supply uncertainty. Shortages of key inputs like silicone oil and ammonia have already begun to affect niche segments such as condoms and medical personal care products, where substitutes are limited.

Paint companies, among the most directly exposed to crude oil, are evaluating price hikes of 2% to 5% if elevated crude prices persist into FY27. However, competitive intensity may delay full pass-through of costs to consumers. Demand for premium products could weaken, with economy segments expected to hold up better.

The textile and apparel sector is also under strain. Crude prices in the range of $100–110 per barrel have pushed up the cost of polyester, nylon, dyes and chemicals by 20% to 25%. Given that synthetic fibres account for nearly 60% of India’s textile output, the sector is particularly vulnerable. Apparel prices are expected to rise gradually from FY27, while retailers are becoming more cautious, delaying launches and tightening inventory.

Bhattacharya warned that the conflict has evolved into a material economic risk. “Sustained escalation would structurally reset cost curves, influence consumer behaviour and reshape India’s retail pricing architecture over the medium term,” he said.

Companies are likely to respond by tightening supply chains, rationalising portfolios and focusing on cost efficiencies, even as they navigate what could be a challenging stretch for both margins and demand.