It’s never necessary for government figures to preach austerity to the Indian people, about 800 million of whom depend on the dole of 5 kg of rice or wheat every month.
About 75% of the rural population and 50% of the urban population skimp as a matter of course. The sheer scale of India’s indigence and the alacrity of her people in adapting to privation was amply evident when millions of workers walked hundreds of miles home after the COVID-19 lockdown was announced, and when, recently, after war broke out in the Persian Gulf, thousands of people engaged in self-employed enterprise downed shutters and caught the bus home. It’s no surprise then that Prime Minister Narendra Modi’s counsel to Indians to defer their gold purchases by a year, desist from travelling abroad, refrain from indulging in foreign weddings, and travel by public transport has received a blasé response, and invited sardonic references to his own tendency towards pomp.
Conceding that some avuncularity is allowed to Prime Ministers, it’s hard not to be wry about Narendra Modi’s wise counsel. At Hyderabad, where he listed seven items that Indians should economise upon, he was coming off an election season in which he staged several road shows, each of which entailed sizeable expenditure that is only partly billed to the BJP but substantially to the state and central exchequers. This activity is pure spectacle and eminently non-essential. At Vadodara on May 11, the PM reiterated his austerity message right after participating in the Somnath Amrut Utsav, where IAF Surya Kirans burnt precious aviation turbine fuel to shower petals on the audience.
Coming from a PM with a yen for optics, such mixed messaging only blunts the serious purpose of drawing attention to the difficult foreign exchange position due to the war in West Asia. The advice to citizens to defer foreign travel, coming from a PM whose own trips abroad cost Rs 175 crore last year, therefore comes off as a bit rich. It’s also opportunistic. The war’s consequences for India have been evident for two and a half months, but right through the election campaign in four states, the PM avoided any mention of them. Now that the cows are coming home, the PM is trying to soften up public opinion before some hard and inevitable decisions are unveiled, not the least of which is a hefty fuel price hike.
From the PM’s two austerity speeches this week, it’s clear that the government is addressing four sources of pressure on forex reserves: gold imports, outward flows due to the Liberalised Remittances Scheme (LRS), oil imports and flight of foreign capital from Indian markets. India’s dollar reserves have dwindled by $38 billion, down from $720 billion, since the start of the war. Gold imports have doubled in three years to $72 billion. Outward remittances under LRS ballooned to $29.56 billion in 2025. And foreign investors have withdrawn Rs $22 billion so far this year.
This makes for a grim situation indeed, but austerity is no answer to it. The PM’s recommendations like work-from-home, will only kill demand, spur unemployment and yield no more than cosmetic results. It is better addressed through government policy and action, such as removing short-term capital gains tax to arrest the flight of capital and pressurising corporate India to increase capital expenditure. By preaching austerity at this juncture, the government is only transferring its burden to the people.