Modi urges Indians to curb spending as Hormuz crisis pressures economy

India’s Prime Minister Narendra Modi has urged citizens to tighten spending, work from home, curb gold purchases and avoid overseas travel as the government seeks to contain the economic fallout from rising energy prices amid the continuing Hormuz crisis.

Modi called on Indians to conserve fuel by working remotely and using public transportation as the world’s third-largest oil importer grapples with mounting pressure from higher energy costs.

The appeal marked the first time the Indian leader has publicly urged austerity measures since the United States launched strikes on Iran. The comments came days after the ruling Bharatiya Janata Party (BJP), buoyed by renewed political momentum, secured victories in state elections against a weakened opposition.

One of the Indian government’s main concerns is the pressure that rising energy prices are placing on the rupee and the country’s foreign exchange reserves. Speaking on Sunday evening in the southern city of Secunderabad, Modi said: “We must reduce our use of petrol and diesel.”

“In cities where metro lines exist, we should resolve to travel only by metro,” he added. “Because petrol and diesel have become so expensive globally, we must also place strong emphasis on conserving foreign exchange.”

Madhavi Arora, chief economist at Emkay Global Financial Services, said Modi may now be adopting a more realistic tone about the economic impact of the Iran war after the elections. According to Arora, speaking to the Financial Times, the shift signals preparations to pass on fuel price increases that have so far largely been absorbed by the government and state-owned oil companies.

“Until recently, the burden was carried only by the oil companies and the government,” Arora said. “Now it is time to bring consumers into the process as well. I think all three economic actors need to share this burden.”

Modi is contending with shortages of cooking gas and rapidly rising oil costs stemming from the Iran conflict. The crisis poses a major challenge for India, which imported $174 billion worth of oil and gas last year. Two-thirds of the country’s natural gas imports and half of its crude oil imports come from the Gulf.

India has turned to alternative suppliers to bridge the gap, including purchases of Russian oil after the United States partially eased sanctions in March. The government has also instructed domestic refiners to prioritize internal demand in cooking gas production.

However, higher import costs have weighed heavily on the currency and undermined investor confidence. The rupee has ranked among Asia’s worst-performing currencies since the outbreak of the Gulf conflict. Having entered the war trading at around 91 to the dollar, the rupee weakened beyond 95, falling to a record low.

Economists are also increasingly concerned about the war’s impact on India’s balance of payments, which was already under strain as foreign investors sold Indian equities at record pace.

Modi urged citizens to suspend non-essential gold purchases for a year and avoid overseas travel for holidays and weddings.

Devarsh Vakil, head of research at Mumbai-based HDFC Securities, said rising crude prices and global instability were placing severe pressure on India’s foreign exchange reserves.

“Reducing discretionary spending such as gold imports and overseas travel could help preserve those reserves,” Vakil said.

India’s foreign exchange reserves have fallen 5% since the start of the war, declining to $690 billion. The Reserve Bank of India has intervened in currency markets by selling dollars in an effort to slow the rupee’s depreciation.

“The core element underlying Modi’s speech is the preservation of foreign exchange,” said Teresa John, chief economist at Mumbai-based Nirmal Bang Research.

As the Gulf crisis drags on, economists are lowering growth forecasts for India, which in recent years has been the world’s fastest-growing major economy. The Reserve Bank of India forecasts GDP growth of 6.9% for the fiscal year ending in March 2027. By comparison, the International Monetary Fund expects growth of 6.5% for calendar year 2026, while Goldman Sachs cut its forecast by 0.6 percentage points to 5.9%.