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

Prime Minister Narendra Modi’s seven-point call to action to Indian citizens reveals the seriousness of the impact of the West Asian crisis. Moreover, apart from its consequences, Mr. Modi’s message is problematic for two other key reasons: its timing and its content. A key part of his message was encouraging people to work from home and reduce fuel use. Leading by example might have been a more effective approach. But Mr. Modi’s message came just days after he and his Cabinet colleagues traveled across the country on roadshows to campaign for the last election. He did not mention these issues in any of his pre-election speeches. His message also comes after daily assurances from government officials that there is nothing to worry about. Obviously there is. The Prime Minister’s message also came after efforts by various Ministers to praise him for not increasing petrol and diesel prices. The decision not to impose further burdens on the common man is welcome, but the downside is that it does not instil in them the need to reduce consumption. The government took this strategic call before the elections and is now trying to dilute it. Maybe fuel prices may increase soon. The Prime Minister’s speech also dovetailed with a similar call to action by the Confederation of Indian Industry for Indian companies. Such coordinated messages indicate a dire situation. Some of the Prime Minister’s proposals may also have other negative effects that may be more serious than the problems they seek to solve. It may not be as effective as some hope.

If farmers stop using chemical fertilizers, as he insists, the direct impact will be on crop production at a time when El Niño is already poised to damage crops. High-frequency indicators are already revealing the economic damage of the West Asian crisis. This will only make the situation worse. The proposal to halt foreign travel will save foreign exchange, but Reserve Bank of India (RBI) data up to February 2026 shows Indians’ foreign travel expenditure in 2025-26 has already fallen by 3%. An even sharper decline is likely to have occurred in March, the first month after the outbreak of the Iran war. The real pressure on the rupee and the Indian currency is the withdrawal of foreign institutional investors and the RBI using precious dollars to support the falling currency. Encouraging Indians to buy local is another way of asking them to consume less, as domestic supply alone is not nearly enough to meet demand. Asking them to buy less gold would probably also be futile. All this means that the economy will go through a difficult period in the next few months; It is a warning that the Prime Minister should have made much earlier, whether there is an election or not.