Narendra Modi calls on Indians to tighten their belts amid Gulf crisis

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Prime Minister Narendra Modi has appealed to Indians to save fuel by working from home and using public transport, as the world’s third-largest oil importer tries to halt escalating economic disruption from higher energy prices.

Modi’s call marked the first time that the leader of the world’s most populous nation had appealed to citizens to tighten their belts since the US attacked Iran. It came a few days after his resurgent Bharatiya Janata Party won victories in state elections against a weakened opposition.

One of the biggest concerns for India’s government is the pressure that higher energy prices are putting on the rupee and foreign exchange reserves.

“We must curb our use of petrol and diesel,” Modi said in a speech late on Sunday in the southern city of Secunderabad.

“In cities with metro lines, we should decide to travel by metro only . . . We must also place a strong emphasis on saving foreign exchange, as petrol and diesel have become so expensive globally.”

Madhavi Arora, chief economist at Emkay Global Financial Services, said “now that the elections are over, Modi can be more realistic about the economic issues” from the Iran war. This meant preparing citizens for rises in fuel prices, which have so far been absorbed by the government and state-owned oil companies.

“Until recently, the pain was only being borne only by the oil companies and the government,” she said. “Now it’s time to involve consumers. I think all three economic agents need to bear the brunt of it.”

Modi has been grappling with cooking gas shortages and surging oil costs from the Iran war. The crisis poses a big challenge in a country which imported $174bn of oil and gas last year, with two-thirds of natural gas and half of crude oil imports coming from the Gulf.

India has turned to other suppliers to make up the shortfall, including buying oil from Russia after the US partly waived sanctions in March, and ordered domestic refiners to prioritise producing cooking gas for local consumption. But higher import prices have hurt the currency and knocked investor confidence.

The rupee has been among Asia’s worst-performing currencies since hostilities began in the Gulf, hitting a historic low of more than 95 to the dollar, after entering the war at about 91.

Economists are concerned over the impact of the war on India’s balance of payments, which is already under pressure from foreign investors selling Indian stocks at the fastest pace on record.

Modi called on Indians to suspend non-essential purchases of gold for a year and avoid travelling abroad for holidays and weddings.

Devarsh Vakil, head of prime research at HDFC Securities in Mumbai, said: “Rising crude oil prices and global instability are putting severe pressure on India’s foreign exchange reserves, and reducing discretionary spending on gold imports and foreign travel could help the country conserve them.”

India’s foreign exchange reserves have fallen 5 per cent since the start of the war to $690bn, as the Reserve Bank of India has attempted to smooth the currency’s decline by selling greenbacks.

Teresa John, a Mumbai-based economist and head of research at Nirmal Bang, said “the underlying factor [of Modi’s speech] is conservation of foreign exchange”.

As the Gulf crisis drags on, economists are revising down their estimates for growth in India, the world’s fastest-expanding major economy in recent years.

India’s central bank estimates that GDP will expand 6.9 per cent in the fiscal year to March 2027 but the IMF is forecasting 6.5 per cent for calendar year 2026 and Goldman Sachs has lowered its number by 0.6 percentage points to 5.9 per cent.