With international oil prices surging after the Middle East war triggered by Iran, Narendra Modi, prime minister of India, one of the world's largest oil importers, made a public appeal to the people to "save on gasoline and gas."
According to Bloomberg and other foreign media on the 11th (local time), Prime Minister Modi said at an event in the southern city of Hyderabad, "Now is the time to use gasoline, diesel, and gas very carefully," adding, "We must use only as much as necessary to save foreign currency and reduce the negative impact of the war crisis."
Modi went on to emphasize the need to reuse energy-saving measures implemented during the COVID-19 pandemic, such as working from home and online meetings. He also asked the public to refrain from unnecessary overseas travel and vacations, weddings, and gold purchases.
India, the world's No. 3 crude oil importer, is taking a direct hit from the Middle East war. Recently, the rupee has fallen to a record low. The Central Bank of India analyzed that if international oil prices rise 10%, the national economic growth rate will fall by 0.15 percentage points and inflation will rise by 0.3 percentage points.
The shock is becoming visible on factory floors as well. Air India, one of India's flagship airlines, reportedly discussed in a recent closed board meeting unpaid leave for nontechnical staff and cutting flight operations by more than 20% over the next three months. It is also said to be reviewing cuts to employee bonuses and executive pay.
Air India moved to emergency management because international oil prices have topped $100 a barrel since the Middle East war. Given the aviation industry's heavy fuel-cost burden, prolonged high oil prices are directly translating into worsening profitability. Bloomberg News said Air India is the first among Indian airlines to consider such emergency steps, calling it a "serious warning sign."
Competition to secure crude oil is also intensifying. According to energy data analytics firm Kpler, India imported an average of 1.98 million barrels per day of Russian crude last month. That is about double the average in January–February this year, before the Middle East war broke out. After the U.S. government issued a sanctions waiver temporarily allowing purchases of Russian crude, Indian refiners moved to sign large additional contracts. Agence France-Presse reported that India is estimated to have purchased an additional 60 million barrels of Russian crude for delivery by this month.
Experts warned that the shock from this Iran war could slow India's economic growth. The Indian government is still maintaining its forecast for the 2026 fiscal year at 6.8%–7.2%, but the market is steadily lowering projections. Goldman Sachs forecast India's growth next year at 5.9%, while Oxford Economics projected 6.2%.
EY India, the global consulting corporations' India unit, also said in a recent report that "if international oil prices remain around $120 per barrel, India's GDP growth could fall to the 6% range and inflation could exceed 6%."
Gaurav Moda, a director at EY India, said, "India has withstood high oil prices so far thanks to solid growth and diversified import sources, but if price increases persist, it could impose unbearable pressure across prices and logistics costs," adding, "Given the structure of high dependence on energy imports, this crisis could go beyond a simple slowdown and lead to a broad-based contraction in real-economy demand."
India is on the verge of entering the G5, but the war makes that unlikely. As recently as last year, India was expected to overtake Japan to become the world's No. 4 economic power, but in the latest International Monetary Fund (IMF) outlook, it slipped back behind the United Kingdom to No. 6.