20–30% rise in raw material costs: What it means for markets after the Iran-US ceasefire

Even after the Iran-US ceasefire announced on April 8, Indian manufacturers are staring at a cost shock. Rising input costs, a weakening rupee, and persistent global uncertainty continue to squeeze margins and stretch working capital cycles.

The sector is navigating a difficult phase where elevated commodity prices and currency depreciation are pushing up production costs across industries. For an import-dependent economy like India, this translates into margin pressure, tighter liquidity, and gradual price increases for consumers.

Sharing his views on the broader market scenario with Business Today, Naman Shah, Managing Director and CEO, Lesol Group, highlighted that financial stress persists despite the ceasefire.

“The current environment is accelerating financial divergence within the industry. The ability of larger companies to handle cost increases, protect against potential losses, and maintain their investment programs comes from their superior financial resources and better capital access. The manufacturing sector of smaller companies operates under stricter cash flow conditions, while they lack the ability to control prices and face greater threats from shifting production costs. While industry consolidation is set to accelerate over the next 12 to 24 months, with smaller players facing exits or acquisitions, the ceasefire announcement may bring short-term relief in the coming two months. Until then, companies will have to continue bearing the cost pressures. The financial system will create more powerful companies that need less capital and possess better supply chains and pricing control, which will boost their ability to compete in the market,” Shah added.

Currency and cost pressures intensify

India is currently caught in a macroeconomic squeeze. The US dollar has strengthened—rising over 12% in the past year—while global commodity prices remain elevated due to prolonged geopolitical tensions.

The impact is now visible across everyday products. Higher crude prices are raising costs not just for fuel but also for petroleum-linked inputs such as plastic resins and chemicals used in electronics and appliances. From smartphones and refrigerators to laptops and kitchen devices, cost pressures are building across categories.

Manufacturers have so far absorbed much of this increase, but that cushion is fading.

“Even after the ceasefire announcement, supply chain normalisation is not immediate due to inherent production and logistics cycles. From crude processing to finished materials like plastic granules, and further global supply dependencies, the correction cycle can take anywhere between 30 to 60 days. However, with advanced forecasting and inventory planning, companies remain relatively insulated in the short term, as highlighted Shah.

"I see the price tags move upward by the second quarter of this year. And in a market as price-sensitive as India, even a 5 to 8% increase can shift buying decisions significantly, which is also unavoidable," he added.

Margins versus demand

Manufacturers are now facing a classic trade-off — raise prices and risk demand slowdown, or absorb costs and see margins shrink.

To navigate this, companies are focusing on improving efficiency, optimising production, and shifting toward higher-margin product mixes. Export-oriented firms are also recalibrating strategies, shifting focus from volatile regions to more stable markets such as the EU and the US.

With elevated crude prices, a weaker rupee, and rising input costs, price hikes across categories are becoming increasingly unavoidable.

Supply chains and working capital strain

Supply chain pressures are intensifying. India imports a large share of electronics components—including semiconductors and display panels — all priced in US dollars.

As the rupee weakens, import costs rise even if global prices remain unchanged. At around ₹92 per dollar, companies are paying nearly 12% more than a year ago due to currency movement alone.

To manage disruptions, companies are building inventory buffers. While this increases working capital requirements, it helps avoid costly production stoppages — making resilience more important than efficiency.

Consolidation cycle accelerates

The current environment is accelerating structural shifts within the industry.

Shah emphasized, “Think of it this way: large companies have the financial firepower to hedge against raw material costs, continue investing in new capacity, and absorb a bad quarter without panicking. A smaller manufacturer with thin margins and limited credit access does not have that luxury. What we'll see over the next 12 to 24 months is a quiet but significant reshaping of India's electronics industry. Some smaller players will exit. Some will get absorbed by larger ones. And a handful of large, integrated manufacturers will emerge with a much stronger grip on the market.

This isn't necessarily bad news for India's electronics ambitions. In fact, larger, more capable players are better positioned to compete globally.”

Policy support and outlook

Policy intervention could help ease some pressure. Measures such as stabilising the rupee, rationalising import duties, and accelerating domestic manufacturing can provide relief. Support for MSMEs in managing currency risks will also be critical.

The bottom line: While the ceasefire may offer short-term relief, cost pressures remain elevated. With price hikes of 5–8% likely by Q2, both companies and consumers should prepare for a more expensive environment ahead.