The Indian prime minister’s call for sacrifice last week marks a fundamental shift. He urged the country’s 1.4 billion people to consume less fuel and fertiliser, buy less gold and curb foreign travel as global energy prices surge because of the war in Iran. The message, redolent of the Covid-era restrictions, suggests something larger: a retreat from neoliberal globalisation in Asia and the return of strategic economic management. The Hindu nationalist Narendra Modi waited for key regional elections to finish before pressing for the austerity measures. He was following other Asian states such as the Philippines, Bangladesh and Sri Lanka, which have made similar requests and even demands of their citizens since March.

Mr Modi made an explicit economic argument: reduce energy imports because India must conserve its foreign exchange. About 90% of India’s oil and gas needs come from abroad. When prices spike, the country faces a higher import bill in dollars, inflation and pressure for higher subsidies. Despite India’s recent economic success, it has not built sufficient productive, export or homegrown green-power capacity to reduce its vulnerability. To prevent the rupee crashing in value, India’s central bank reportedly burned through more than $40bn in reserves.

Analysts from the Japanese bank Nomura see “a deeper rethink” on how India manages its external sector. The crisis in the strait of Hormuz also 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 much deeper instinctive feel for this danger than parts of today’s Indian policy establishment. The death two years ago of India’s former prime minister Manmohan Singh, who was finance minister during the 1991 emergency, silenced an authoritative voice for whom the current account deficit was not an abstraction; it was existential. That experience shaped a cautious, strategic mindset through India’s opening-up phase of the 1990s and 2000s.

What changed in 2014 with Mr Modi was a sense that India had arrived – partly because the country had experienced a long period of trouble-free economic growth. Mr Modi treated globalisation as durable enough to justify India’s deeper, more confident integration into world markets. China’s rise also altered Indian ambitions. The underlying assumption among elites was that India was too big to fail. That idea bred complacency.

Pride before a fall, they say. The United Nations warned in April that south Asia, in which 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%. By comparison, the figure in east Asia, dominated by China, is just 0.4%. The UN suggests that that resilience comes not from ever-deeper dependence on fragile global markets, but from domestic productive capacity, strategic buffer stocks of essentials and the prioritisation of economic security over brittle efficiency. That reads like a repudiation of the tenets of globalisation.

The post-1990 era was an unusually stable order that allowed countries like India to tolerate external dependencies that they once considered risky. The Iran crisis – and wider geopolitical fragmentation – is exposing how contingent and fragile that world always was.

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