Prime Minister Narendra Modi asked India’s 1.4 billion people to cut spending on fuel, fertilizer and travel, a call for sacrifice that sounded like a thunderclap and underlined the severity of the economic crisis caused by the war with Iran.
Prime Minister Modi made these sweeping recommendations in his national address on Sunday after his party’s major victory in the recent state elections. With that victory, he no longer has to worry about voters punishing his candidate for higher fuel, food and transportation costs, which are tightly controlled by the Indian government. Instead of subsidizing losses and running a huge budget deficit, India’s leader appears to have boldly asked its people to bear the burden.
“If we want to save foreign exchange, we must accept the challenge of patriotism,” he said. This means cutting spending on gasoline and diesel and cutting spending on everything India imports to preserve limited supplies due to the blockade of the Strait of Hormuz. He urged people to buy less gold, farmers to use solar pumps instead of diesel, and office workers to work from home.
Citing the Covid-19 pandemic restrictions, he said the use of online meetings by office workers was again in India’s national interest. Reduced commuting times mean less gas bills and less strain on India’s budget.
In the information technology hub city of Hyderabad, one of the few states his party has yet to conquer, Prime Minister Modi announced a long list of demands, many of them aimed at the city’s middle class.
People who own electric vehicles said they should use them more and carpool. He told about 1% of people not to go on foreign holidays. This should keep more dollars within India and protect the rupee, which has lost 10% of its value over the past year, half of the losses since the United States and Israel began bombing Iran in late February.
Mr. Modi received this message late from Asia. The Philippines, Bangladesh, and Sri Lanka have also been making similar requests and even demands to their citizens since last March. By contrast, India has increased its deficit and increased losses to its state-run oil company, alleviating ordinary citizens from the pain of the energy crisis.
Indians first felt the pinch as cooking gas supplies became scarce during the war in Iran. National oil companies have begun buying more crude oil at higher prices and converting it to refineries that make liquefied petroleum gas, making these challenges manageable. But according to local media reports, they are losing about $175 million a day.
Mr. Modi has now signaled that kicking it down the road is no longer possible. India is failing to meet its budget targets by uncomfortable margins, its currency is weakening and inflation is rising as the value of India’s imports is increasing while its exports are stagnating.
The government has a new opportunity to do something about this. More than 150 million people voted in April, and on May 4, when the results of four state elections were counted, Prime Minister Modi’s party won a landslide victory.
Pressure on India’s government finances is “at a tipping point,” the Nomura Holdings research unit said in a report on Monday, adding that despite state elections being over, some of the measures requested by Prime Minister Modi with his call for office this week could soon become mandatory.
For years, asking the Indian public to make sacrifices has been a hallmark of Prime Minister Modi’s rule. He asked for patience regarding the confusion caused by the sudden invalidation of 500 and 2,000 rupee notes in 2016 to eradicate ‘black money’ used by criminals.
Despite slowing economic growth and little black money, he won important elections after the movement. Likewise, at the onset of the COVID-19 pandemic, Prime Minister Modi imposed the strictest lockdown anywhere. They shrank the economy by more than 20%, but he remained popular.
Such appeals have not always worked so well. In November 2023, he called on wealthy citizens to ‘Wed In India’ to help preserve foreign exchange reserves. His party workers called the families of wealthy brides and grooms and implored them to marry within India instead of lavish weddings in places such as Lake Como, Italy and Dubai.
Those efforts failed to prevent Mr. Modi’s party from losing parliamentary seats in 2024.
This time Mr. Modi went one step further. He repeatedly called for a halt to foreign weddings, adding: “You should resolve not to buy gold for a year.”
Gold accounts for nearly 9% of India’s annual imports, second only to oil and gas. Most Indian families buy it to save money and celebrate important events such as weddings. If you do not voluntarily give up, the government may restrict purchases by other means.
