Not all Prices are Equal: Sectoral Gaps in Indian Manufacturing Pricing Power

This paper examines the pricing power of Indian manufacturing firms at the 2-digit level of the National Industrial Classification (NIC), using input and output price indices derived from Supply and Use Tables and wholesale price data. Pricing power, defined as a firm’s ability to raise prices without losing demand, is crucial for maintaining profitability amid economic uncertainties like trade policy shifts and rising commodity prices. Using vector autoregression (VAR) models — including static, time-varying, and quantile frameworks — the study finds sector-specific differences in pricing power. Industries such as pharmaceuticals, electronics, and machinery show increased pricing power over time, while sectors like food, rubber, and leather exhibit weaker pricing ability. The results underscore how input cost trends and sectoral dynamics shape firms’ ability to pass on costs, with implications for profitability and monetary policy transmission.