Close on the heels of Prime Minister Narendra Modi’s appeal to citizens to adopt practices that would curb the country’s foreign exchange outflow and energy use, the government is preparing a broad set of austerity measures for itself.
According to official sources, given the deepening economic fallout of the ongoing West Asia conflict, ministries and departments have been instructed to significantly cut administrative expenditure by rationalising fuel consumption, restricting official travel, reducing ceremonial spending, and shifting meetings and government functions to digital platforms wherever possible.
“All ministries and departments have been asked to identify immediate measures to curb unnecessary foreign travel and fuel use,” a senior official said, adding that the curbs will apply to both ministers and officials.
Orders expected soon
Orders on these austerity measures are expected to be issued shortly by the respective ministries and departments, sources said. The Department of Expenditure will also issue a similar order, which mau have an impact on spending priorities.
The focus of all this, officials indicated, is primarily on containing fuel demand amid growing concerns over global supply disruptions and rising import costs.
The closure-related uncertainty around the Strait of Hormuz has emerged as a major concern for policymakers, as it threatens energy supplies and pushes up crude oil prices. Officials acknowledged that fuel availability and affordability have become the government’s biggest worry.
Concerns have also intensified over the possibility that the United States may not extend sanctions waivers related to purchases of Russian oil and gas, adding to anxiety within the government.
India’s foreign exchange position, although still strong, has come under renewed pressure. Forex reserves had touched a record high of over USD 728 billion in early 2026, but have since declined by nearly USD 33 billion following the onset of the conflict, reflecting intervention by the Reserve Bank of India to stabilise the rupee.
The rupee has depreciated nearly 11% over the past year, including 4.7% since the conflict escalated. Economists estimate usable reserves could be substantially lower after adjusting for gold holdings, SDRs and RBI forward positions.
Meanwhile, Chief Economic Adviser V. Anantha Nageswaran recently warned that India’s current account deficit could rise above 2% of GDP in FY27 from below 1% in FY26, while fiscal deficit targets may also come under strain. Petroleum Minister Hardeep Singh Puri stated that state-run oil marketing companies could face under-recoveries of nearly Rs 1 lakh crore in the April–June quarter alone due to retail fuel losses. The under recoveries, however, are estimated to be Rs 2 lakh crore.
