In a significant shift, Indian Prime Minister Narendra Modi has called on the country's 1.4 billion citizens to consume less fuel and fertiliser, buy less gold, and curb foreign travel as global energy prices surge due to the war in Iran. This message, reminiscent of Covid-era restrictions, signals a retreat from neoliberal globalisation in Asia and the return of strategic economic management.
Modi's Austerity Measures
Modi waited for key regional elections to conclude before pressing for these austerity measures. He follows other Asian states such as the Philippines, Bangladesh, and Sri Lanka, which have made similar requests since March. The explicit economic argument is to reduce energy imports and conserve foreign exchange, as about 90% of India's oil and gas needs come from abroad. Price spikes lead to higher import bills in dollars, inflation, and pressure for increased subsidies. Despite recent economic success, India has not built sufficient productive, export, or homegrown green-power capacity to reduce its vulnerability. To prevent the rupee from crashing, India's central bank reportedly burned through more than $40 billion in reserves.
Geopolitical Fragmentation
Analysts from Japanese bank Nomura see a deeper rethink on how India manages its external sector. The crisis in the Strait of Hormuz demonstrates that Asia's post-1990 growth model, which India increasingly embraced, depended on a geopolitical environment that is ending. Once the assumption of secure, US-policed shipping lanes, cheap Gulf hydrocarbons, and low freight costs vanished, the balance-of-payments constraint for developing nations returned with a vengeance.
A generation shaped by India's 1991 balance-of-payments crisis had a deeper instinctive feel for this danger than parts of today's Indian policy establishment. The death two years ago of former Prime Minister Manmohan Singh, who was finance minister during the 1991 emergency, silenced an authoritative voice for whom the current account deficit was existential. That experience shaped a cautious, strategic mindset through India's opening-up phase of the 1990s and 2000s.
Complacency and Fragility
What changed in 2014 with Modi was a sense that India had arrived, partly due to a long period of trouble-free economic growth. Modi treated globalisation as durable enough to justify deeper integration into world markets. China's rise also altered Indian ambitions, with elites assuming India was too big to fail, breeding complacency. The United Nations warned in April that South Asia, where India is the biggest actor, faces the largest losses from the US-Israel war on Iran, with its regional economy potentially shrinking by 3.6%. In contrast, East Asia, dominated by China, faces only a 0.4% shrinkage. The UN suggests that resilience comes not from deeper dependence on fragile global markets but from domestic productive capacity, strategic buffer stocks, and prioritisation of economic security over brittle efficiency.
The post-1990 era was an unusually stable order that allowed countries like India to tolerate external dependencies once considered risky. The Iran crisis and wider geopolitical fragmentation are exposing how contingent and fragile that world always was.
