Prime minister Narendra Modi on Sunday appealed to Indians to reduce travel, hold off on purchase of gold and take to working from home in an effort to conserve fuel and foreign exchange in view of the shortages caused by the US-Israeli war on Iran.
Addressing a public meeting, Mr Modi urged the citizens to increase the usage of public transport and electric vehicles, and revive the Covid-era measure of work-from-home.
Asking the people to keep the “country above all else”, he said: “Use metros wherever metros are available. Use carpooling to go to places, and use the railways if you have to transport goods. All of this will reduce dependency on petrol and diesel, and thereby cut the dependence on foreign currency.”
Stating that the Covid-era measures were the need of the hour, he asked people to revert to the methods developed during the pandemic, including virtual meetings and video conferencing.
A jump in crude oil prices after the US-Iran peace talks hit a stalemate and Mr Modi's appeal spooked currency traders on Monday, sending the rupee past 95 per dollar.
Indian assets were under pressure across the board, with the rupee falling 0.75 per cent to 95.1850 per dollar, the benchmark equity index Nifty 50 shedding over one per cent and the yield on the 10-year-benchmark note rising 5 basis points to 7.03 per cent.
Gold fell one per cent on Monday, as elevated oil prices stoked worries over inflation and prolonged high interest rates.
The renewed pressure on Indian markets came after US president Donald Trump on Sunday rejected Iran's response to a US proposal for talks to end the war, saying Tehran's demands were "totally unacceptable".
Brent oil futures jumped four per cent in Asian trade to $105.7 a barrel. Higher oil prices are a major risk for net energy importer India and threaten to widen the country's current account deficit, slow growth and stoke inflation.
"Inflation risks still weigh heavy on the market's collective mind, as attempts to end the Middle East conflict reached an impasse after the US and Iran rejected each other's peace proposals," said Han Tan, chief market analyst at Bybit.
Gold prices have fallen more than 11 per cent since the war began in late February, pressured by higher oil prices. While gold is seen as an inflation hedge, high rates tend to weigh on the non-yielding asset.
The Reserve Bank of India has sold dollars from its foreign exchange reserves to defend the currency, cracked down on arbitrage activity, and is considering measures to shore up dollar inflows.
However, in a bid to conserve foreign exchange, the prime minister also urged the middle class to “postpone travelling abroad for at least a year”, especially those taking vacations overseas and having weddings at foreign venues.
He also asked the people to reduce the use of cooking oil by 10 per cent, saying “this will not only help the nation during these times but also improve the health of your family”.
The prime minister advocated for greater use of indigenous products, asking people to list down the things they used daily and identify foreign-made items. “Efforts should be on to build self-reliance as soon as possible,” he said, while clarifying that he was not asking people to throw away foreign goods.
“We have to save foreign exchange by any means,” he said.
However, less than a day after the appeal, the prime minister held a roadshow in his home state of Gujarat to mark 75 years of the consecration of Somnath temple.
The leader of opposition, Rahul Gandhi, criticised the prime minister for his message, calling it “evidence of failure” of his Hindu-nationalist Bharatiya Janata Party government.
"Yesterday, Modi called upon the public to make sacrifices – do not buy gold, do not travel abroad, consume less petrol, cut down on fertilisers and cooking oil, take the Metro, and work from home," Mr Gandhi posted on X in Hindi. “These are not words of counsel. They are evidence of failure.”
He condemned the prime minister for shifting the “responsibility onto the people” during a time of crisis as a way to “escape accountability themselves”.
“Running the country is no longer within the reach of a compromised PM.”
Since the Iran war broke out, the rupee has declined over four per cent and the Nifty 50 has fallen five percent, accompanied by a near 40 bp rise in India's 10-year sovereign bond yield.
"As energy-related disruptions linger, rising risks of fuel shortages could pose a more differentiated challenge ... particularly for economies with relatively low crude inventory buffers. This includes India and several Asean markets such as the Philippines, Vietnam, and Indonesia," analysts at MUFG said in a note.