Businesses need to be prepared for possibilities of a continued or higher inflation and deflation of commodity prices in next 2-3 years, Hindustan Unilever CEO and MD Sanjiv Mehta said on Tuesday.
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, he said while speaking at the FICCI LEADS 2022 event here. “It is very difficult to predict but I think where we have to be ready with is possible three scenarios in the world today,” Mehta said when asked about his thoughts on the possibility of inflation coming down in the near future.
One possibility is, he said, “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.” Mehta 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”.
The wholesale price-based inflation had eased to 11-month low of 12.41 per cent in August, on softening in prices of manufactured and fuel products, even as food items remained expensive. Although the WPI-based inflation declined for three consecutive months, it remained in double digit for 17 months beginning April last year. The inflation was 13.93 per cent in July and 11.64 per cent in August last year. It had touched a record high of 15.88 per cent in May this year.
Global supply chain disruptions caused by COVID-19, the huge amount of fiscal spending, especially in many developed world, and the war in Ukraine and its impact on energy prices are the main reasons for high inflation, he added. Mehta said 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”, he added.