​Belated warning: On the Prime Minister’s austerity appeal

Prime Minister Narendra Modi’s seven-point call to action for the citizens of India lays bare the severity of the impact of the West Asia crisis. Further, apart from its implications, Mr. Modi’s message is problematic for two other key reasons: its timing and content. A key part of his message was to urge people to work from home and reduce their fuel usage. A more effective approach might have been to lead by example. Yet, Mr. Modi’s message comes days after he and his Cabinet colleagues flew all over the country and organised roadshows to campaign for the recent elections. Neither did any of his pre-election speeches mention these issues. His message also comes on the back of daily reassurances by his government’s officials that there was nothing to worry. Clearly, there is. The Prime Minister’s message also follows various Ministers’ attempts to heap praise on him for not raising petrol and diesel prices. A decision not to further burden the common man is welcome, but the flip side is that it fails to impress upon them the need to curtail consumption. The government took that strategic call before the elections, and is now trying to dilute it. Perhaps a hike in fuel prices will follow soon. The Prime Minister’s speech also coincided with a similar call to action for Indian corporates by the Confederation of Indian Industry. This kind of coordinated messaging points to a dire situation. Several of the Prime Minister’s suggestions might also have other negative impacts that could be more serious than the problems they are trying to address. Some others might simply not be as effective as he hopes.

If farmers stop using chemical fertilizers, as he has urged, the immediate impact will be on crop output at a time when El Niño is already set to hurt it. High-frequency indicators are already revealing the economic damage of the West Asia crisis. This will only exacerbate the situation. The suggestion to stop foreign travel will conserve foreign exchange, but Reserve Bank of India (RBI) data up to February 2026 shows that Indians’ foreign travel spending in 2025-26 was already down by 3%. March, the first month after the Iran war broke out, is likely to have seen an even sharper decline. The real pressure on the rupee and India’s foreign exchange is because foreign institutional investors are pulling out while the RBI is using valuable dollars to shore up the falling currency. Urging Indians to buy local is another way of asking them to consume less, since purely domestic supply is not nearly enough to cater to the demand. Asking them to buy less gold is also likely to be futile. All this means that the economy is in for a hard time over the next few months — a warning the Prime Minister should have delivered much earlier, elections or no elections.