Prices of beauty products and services grew at 6.3% on average in the April-June period compared to 6.5% in FY23, according to official data.
Average inflation dipped to 4.6% in the first quarter of FY24 compared with 6.7% in FY23, but inflation in beauty products and segments has remained high.
But economists note this may normalise from the current quarter onwards. “We believe that the typical ‘lipstick effect’ may be at play here for consumer choices,” said Yuvika Singhal, economist, QuantEco Research.
The lipstick effect is defined as a phenomenon where consumers tend to turn to small indulgences when facing a crisis.
The rising prices of beauty products and services could also be attributed to the “ripple effect of high inflation”, said Paras Jasrai, senior analyst, India Ratings and Research. “Strong demand from upper-income strata households may also be a contributing factor.” Beauty products, toiletries, along with jewellery are classified in the inflation basket as personal care and effect items and carry a 4.25% weight.
In June, the category recorded 9.03% inflation, compared with the overall retail inflation reading of 4.81%.
Madan Sabnavis, chief economist, Bank of Baroda, believes that besides the lipstick effect, return to office and producers passing on costs to consumers may also be a reason for rising prices in this segment.
But he said the impact may be short-lived and will be diluted by this year-end as companies finish pass-through of earlier costs by Q2.
Economists suggest that the upsurge in demand is not restricted to beauty products and services but is also showing in prices of ornaments other than gold and silver.
Inflation in the other ornaments category averaged 9.8% in Q1FY24, higher than 6.7% in FY23.