Narendra Modi, India’s prime minister, speaks during a joint press statement with Lawrence Wong, Singapore’s prime minister, not pictured, at Hyderabad House in New Delhi, India, on Thursday, Sep. 4, 2025.
Prakash Singh | Bloomberg | Getty Images
Indian Prime Minister Narendra Modi on Sunday urged citizens to curb fuel use, reduce overseas travel, and pause gold purchases, underscoring the severe impact of the Iran war on the economy.
Global fuel costs have surged, Modi said in a public address in the southern city of Hyderabad, appealing to Indians to use public transport, work from home, and carpool to conserve fuel.
India is the latest among the growing number of Asian countries encouraging lower fuel consumption as energy costs climb amid tensions in the Middle East.
On Sunday, President Donald Trump said Iran’s counterproposal to end the war with the U.S., and Israel was “TOTALLY UNACCEPTABLE!”, dashing hopes of peace and pushing global oil prices higher.
India imports nearly 85% of its fuel needs and relies on the Strait of Hormuz for about 50% of its crude imports, 60% of its liquefied natural gas, and almost all of its liquefied petroleum gas (LPG) supplies.
Higher energy costs are expected to significantly widen the country’s trade deficit and current account deficit. The rupee has also come under strain and is trading near an all-time low against the dollar.
Modi said reducing foreign travel and gold imports would help conserve foreign currency reserves as higher oil prices increase pressure on India’s import bill.
Shares of Indian jewelry companies fell by as much as 10% on Monday, with the stock of the Tata group-owned jeweler Titan falling nearly 6% in early trade.
Shares of Indian flight carrier IndiGo’s also fell 2.8%. The airline is expanding its services on international routes and expects overseas flights to account for 40% of daily services by 2030, according to local media reports.
Economic woes
India spent $174.9 billion on crude and petroleum products, or 22% of its total imports in the financial year ended March 2026, highlighting the economy’s dependence on overseas commodities. The country is the world’s second-largest gold buyer after China, spending nearly $72 billion on gold imports.
About 32.7 million Indians traveled abroad in 2025, including more than 14 million leisure travelers.
“The Middle East conflict represents a historically large energy shock with asymmetric macro risks,” said global brokerage UBS Securities in a May 4 note, lowering its forecast for India’s economic growth in the financial year ending March 2027 to 6.2% from 6.7% earlier.
“I don’t believe that a [economic] shock is around the corner,” said Nirupama Rao, former Indian ambassador to the U.S., China and Sri Lanka, told CNBC’s Inside India on Monday.
However, she said the country faces “difficult times ahead” unless there is peace or a resolution of the crisis in the Middle East.
Despite pressure on the economy, the government has kept retail fuel prices at the pump stable and instead opted to cut taxes to ease the burden on oil companies. With pump prices remaining stable, demand for fuel has remained unaffected.
Analysts have expected Modi’s government to introduce tougher economic measures after his ruling Bharatiya Janata Party won recent elections held in a few key states, but those policy changes have yet to emerge.
In March, India’s chief economic advisor, V. Anantha Nageswaran, warned that the country’s trade deficit would “rise significantly” in the next financial year ending March 2027.
“Keeping it manageable will require burden-sharing between the government, via fiscal absorption, and households and businesses,” Nageswaran had said.
