Modi says war with Iran poses major risk to India, urges cut in fuel consumption and gold purchases
Narendra Modi, prime minister of India, speaks during a joint press conference with Lawrence Wong, prime minister of Singapore, not pictured, at Hyderabad House in New Delhi, India, Thursday, Sept. 4, 2025.
Prakash Singh Bloomberg | Getty Images
Indian Prime Minister Narendra Modi on Sunday urged citizens to reduce fuel consumption, reduce overseas travel, and freeze gold purchases, stressing the negative impact of the Iran war on the economy.
Global fuel costs have risen, Modi said in a public address in southern Hyderabad, urging Indians to use public transport, work from home and carpool to save fuel.
India is the latest among a growing number of Asian countries to promote lower fuel consumption as electricity costs rise amid unrest in the Middle East.
On Sunday, President Donald Trump said that Iran’s opposition proposal to end the war with the US, and Israel is “UNACCEPTABLE AT ALL!”, ending hopes for peace and driving up global oil prices.
India imports about 85% of its fuel needs and relies on the Strait of Hormuz for about 50% of its crude oil imports, 60% of its liquefied natural gas, and almost all of its petroleum gas (LPG) imports.
Higher energy costs are expected to significantly widen the country’s trade deficit and current account deficit. The rupee has also come under pressure and is trading near all time is low against the dollar.
Modi said reducing foreign travel and gold imports would help preserve foreign currencies as high oil prices put pressure on India’s import bill.
Shares of Indian jewelery companies fell nearly 10% on Monday, with the Tata group’s share price also falling. The Titan down about 6% in early trade.
Indian carrier shares IndiGo and decreased by 2.8%. The airline is expanding its services to international routes and expects international flights to reach 40% of daily services by 2030, according to local media reports.
Economic problems
India spent $174.9 billion on crude and petroleum products, or 22% of all imports in the fiscal year ending March 2026, highlighting the economy’s dependence on overseas goods. The country is the world’s second largest buyer of gold after China, spending about $72 billion on gold imports.
About 32.7 million Indians will travel abroad by 2025, including more than 14 million leisure travelers.
“The conflict in the Middle East represents a major energy shock with significant risks,” international firm UBS Securities said in a May 4 note, lowering its forecast for India’s economic growth in the fiscal year ending March 2027 to 6.2% from 6.7% previously.
“I don’t believe that a [economic] shock is imminent,” Nirupama Rao, India’s former ambassador to the US, China and Sri Lanka, told CNBC Inside India on Monday.
However, he said the country is facing “difficult times” unless there is peace or a solution to the crisis in the Middle East.
Despite the pressure on the economy, the government kept fuel prices stable and instead chose to lower taxes to ease the burden on oil companies. As pump prices remain stable, demand for gasoline remains unaffected.
Analysts expect Modi’s government to introduce tough economic measures after his ruling Bharatiya Janata Party won recent elections in several key states, but those policy changes have yet to materialize.
In March, India’s chief economic adviser, V. Anantha Nageswaran, has warned that the country’s trade deficit will “increase significantly” in the next fiscal year ending March 2027.
“Keeping it manageable will require sharing the burden between the government, through spending, and households and businesses,” Nageswaran said.
