Narenda Modi tells Indians to stop buying gold, work from home, as Iran war dents economy

Prime Minister Narendra Modi on Sunday urged Indians to cut down on petrol and diesel consumption and stop buying gold, in a sign that the US-Israeli war on Iran is starting to jolt the world’s fourth-largest economy.

India is one of the few countries in the region that has not increased petrol and diesel prices for domestic consumers or rationed supplies. However, it has increased the price of liquefied petroleum gas (LPG) - a primary cooking fuel in the country.

India imports around 60 percent of its LPG from Qatar, the United Arab Emirates and Saudi Arabia, with 90 percent arriving through the Strait of Hormuz, which is effectively closed as a result of dual US and Iranian blockades.

Modi’s remarks signal that the country is now gearing up for shortages and price hikes to spread to other fuels.

"We have to reduce our use of petrol and diesel. In cities with metro lines, we should try to travel by metro...If we must use a car, then we should try to carpool," Modi said in the southern Telangana state.  

He added that restrictions on use were also necessary to save foreign currency spent on fuel imports.  

"We must also place a strong emphasis on saving foreign exchange, as petrol and diesel have become so expensive globally." 

Notably, the Indian premier called on citizens to stop buying gold for a year and avoid travelling abroad. The precious metal has long been the preferred store of wealth in the Middle East and Asia and is popular as a wedding gift.

Gold, like oil, is priced and traded globally in US dollars. In 2022, India raised tariffs on gold to stifle domestic demand for the precious metal and conserve dollars.

India imports about 90 percent of its oil and 50 percent of its gas. The higher prices caused by the war on Iran have dented India’s foreign exchange reserves.

The Indian rupee is not officially pegged to the dollar, but it has been hit by the outflows. The rupee dropped to a record low against the dollar last week.

India’s central bank has intervened in the market to support the currency by selling dollars. India also relies on dollar inflows from workers in the Gulf, particularly the UAE. But with the tourism sector dented by the war, those flows have been impacted.

Modi urged people to resume energy-saving schemes that were in place during the Covid pandemic.  

"We should prioritise work from home, online conferences, and virtual meetings again," he said.