Prime Minister Narendra Modi’s appeal to Indians to cut down on foreign travel, reduce gold purchases, adopt work-from-home practices, and conserve fuel marks one of the strongest public acknowledgements yet of the mounting pressure on India’s external sector amid the prolonged West Asia conflict and elevated crude oil prices.
Speaking in Hyderabad, Modi said that the issue is not merely an economic challenge but a matter of “economic patriotism”, urging citizens to help conserve foreign exchange reserves at a time when India’s import bill is rising due to higher crude prices and supply disruptions around the Strait of Hormuz.
The remarks come as India faces a sharp rise in oil import costs, already increased gold imports, volatile foreign capital flows, and concerns around the current account deficit (CAD), even though the country continues to maintain one of the world’s largest foreign exchange reserve buffers.
Oil Shock
India remains heavily dependent on imported crude oil, sourcing nearly 90 per cent of its requirements from overseas markets. The ongoing conflict involving the US, Israel and Iran has disrupted shipping routes and kept the Strait of Hormuz under severe stress for almost 10 weeks, pushing global crude prices sharply higher.
According to data from the Ministry of Petroleum and Natural Gas, India’s crude oil import bill has remained elevated over the past five financial years. The average annual crude oil import bill over the period stood at nearly Rs 11.67 lakh crore.
Industry estimates suggest that Indian oil marketing companies are currently burning between Rs 1,000 crore and Rs 1,500 crore daily because of elevated crude prices and pricing pressures. The sector is estimated to have suffered losses of nearly Rs 2 lakh crore in just a few months as crude prices jumped from around USD 75 per barrel to nearly USD 105 per barrel during the conflict.
The situation has become particularly worrying because India’s FY26 crude import bill crossed Rs 12.50 lakh crore within just two months of intensified geopolitical disruptions. The estimates suggest that if crude stabilises at around USD 90 per barrel for a sustained period, India’s annual oil import bill could rise to between Rs 14 lakh crore and Rs 15 lakh crore.
Gold Burden
Gold is turning into yet another thorn in the side of the Indian economy. India is among the world’s largest importers and consumers of gold and relies almost entirely on imports to meet domestic demand. Gold imports primarily come from countries such as Switzerland, South Africa and the UAE.
According to data from the Directorate General of Commercial Intelligence and Statistics (DGCI&S) and the Ministry of Commerce and Industry, India’s gold imports have risen sharply. The five-year annual average stands at roughly Rs 4.15 lakh crore.
The sharp jump in FY26 reflects both elevated global gold prices and strong domestic demand, particularly amid geopolitical uncertainty where gold is viewed as a safe-haven asset.
However, from a macroeconomic standpoint, high gold imports significantly worsen the trade deficit because gold does not generate productive export capacity or industrial output at scale.
Travel Outflows
Foreign travel and overseas spending under scrutiny as the data from the Reserve Bank of India (RBI) shows that Indians’ overseas spending, including travel, overseas education, gifts, investments and maintenance expenses, has remained substantial. The annual average stands at approximately Rs 2.24 lakh crore.
Within this, travel remains the single-largest component. Indians spent nearly USD 73 billion, roughly Rs 6 lakh crore, on overseas travel over the past five years, translating into annual spending of nearly Rs 1.25 lakh crore.
With aviation turbine fuel prices elevated and the rupee under pressure, reducing outbound travel is increasingly being viewed by policymakers as a method to preserve foreign exchange reserves.
PM Modi’s appeal to farmers to cut fertiliser use by half also reflects concern over India’s dependence on imported fertiliser inputs. According to data from the Department of Chemicals and Fertilisers and the Fertiliser Association of India, fertiliser imports stood at roughly Rs 1.43 lakh crore.
India imports substantial quantities of urea, phosphatic fertilisers and potash-based nutrients. Higher energy prices globally directly increase fertiliser production and transportation costs, worsening India’s subsidy burden as well.
CAD Concerns
The broader concern is the risk of a widening current account deficit. India’s external position currently presents a mixed picture. On one hand, the country maintains strong foreign exchange reserves of around USD 690.69 billion currently, healthy enough to cover the import bill of around 11 months.
However, reserves have already declined from nearly USD 728 billion in February 2026, reflecting sustained intervention pressures and higher import outflows. At the same time, foreign capital flows are turning increasingly volatile.
Foreign portfolio investors (FPIs) pulled out nearly USD 10.8 billion, around Rs 89,640 crore, in March 2026 alone amid geopolitical tensions and tighter global liquidity conditions.
Foreign direct investment trends are also becoming less supportive. While gross FDI inflows during April 2025-January 2026 rose to USD 79.3 billion, net FDI flows have remained negative since the second half of 2025 because outbound investments and repatriations have exceeded fresh inflows. January 2026 itself recorded a net FDI outflow of USD 1.3 billion despite gross inflows of USD 5.7 billion.
Remittances at Risk
Another emerging concern is the possible impact on remittances from the Gulf region. India receives nearly Rs 12 lakh crore annually in remittances from overseas Indians. Nearly 40 per cent of this comes from Gulf economies heavily linked to the energy sector.
Any prolonged disruption in West Asia could potentially affect employment conditions and remittance flows from the region, thereby adding another layer of stress to India’s balance of payments position.
Unlike during the Covid-19 pandemic, however, the challenge now is not a collapse in domestic demand but the possibility of a sustained external sector shock driven by imported inflation, rising commodity prices and global geopolitical fragmentation. |
