India is rolling out Covid-era austerity measures as the ongoing war in West Asia and new threats from Iran push crude oil prices above $110 a barrel, straining the nation's economy.
A renewed threat from an Iranian military spokesperson to “open a new front” has intensified geopolitical risk in the Middle East, pushing Brent crude prices over $110 a barrel and extending a conflict that has shut the Strait of Hormuz for over two months. The spike threatens to worsen inflation for major importers like India, which is now implementing nationwide fuel-saving measures.
"The narrow recovery indicates that sentiment remains fragile for countries like India that are dependent on energy imports, as the Iran war has extended to a third month and pushed Brent Crude prices above $110 per barrel,” said Dharmesh Kant, head of equity research at Cholamandalam Securities.
India’s benchmark Nifty 50 and BSE Sensex indices both fell as much as 1.4% on Monday before recovering to close largely flat, highlighting investor fragility. The country's foreign exchange reserves have dropped by $38 billion since the conflict began, one of the steepest drawdowns in Asia, as the import bill for oil, gas, and other commodities surges.
With nearly 90% of its crude oil imported, India's economy is acutely vulnerable to sustained high prices. The government's push for fuel conservation, work-from-home policies, and EV adoption is a direct attempt to reduce foreign exchange outflows and mitigate the risk of higher inflation and economic instability as the conflict shows no signs of abating.
Prime Minister Narendra Modi has urged citizens to cut non-essential travel, use public transport, and prioritize locally made goods to conserve foreign exchange. The appeal has triggered a wave of austerity measures across government departments and public sector undertakings (PSUs).
The Department of Financial Services has ordered institutions like the State Bank of India and Life Insurance Corporation of India to conduct meetings virtually and accelerate the transition of their vehicle fleets to electric. The power ministry issued a similar advisory to firms including NTPC and Power Grid Corporation of India, suggesting up to 20% of staff could work from home.
The conservation drive extends beyond government offices. In Uttar Pradesh, the state government ordered a 50% reduction in vehicle convoys for dignitaries. Corporate India is also responding, with RPG Group Chairman Harsh Goenka calling for reduced travel and Shaadi.com founder Anupam Mittal implementing a work-from-home Wednesday, estimating it could save nearly 30,000 litres of petrol annually for 500 employees.
Hindustan Unilever noted that over 97% of its energy now comes from renewable sources and it is expanding EV use in its supply chain. The Confederation of Real Estate Developers’ Associations of India even shifted its annual convention from Amsterdam to India to support the conservation push.
While the broader market remains cautious, analysts see policy-driven opportunities in specific sectors. The government's push for energy efficiency and grid upgrades to support EV charging is seen as a direct benefit for state-led power financing companies like REC Ltd.
Similarly, the fuel-saving policy's emphasis on rail for goods transport could support freight volumes and capex financing, creating a positive outlook for firms like Indian Railway Finance Corp (IRFC). The IT index also saw a 2.4% rise on Monday, with a stronger dollar expected to boost earnings for export-oriented technology companies.
This article is for informational purposes only and does not constitute investment advice.
