Reforms will deliver 10 times the savings from austerity measures

Indians prefer saving over spending. But for this to happen naturally, it requires more than calls to save fuel or work from home

It is difficult to fault the Prime Minister’s call for austerity in the wake of mounting pressure on energy costs and the deep fractures in global supply chains. Among other things, he asked citizens to use less petro-fuels by using public transport, exhorted farmers to reduce fertiliser consumption, and urged companies to allow employees to work from home. He also asked consumers to reduce gold purchases and foreign jaunts to conserve foreign exchange. When the economic going gets tough, voluntary belt-tightening is the first stop.

 

The problem with austerity measures, while well-intentioned, is that they cannot substantially move the needle on consumption trends because the underlying reasons for this demand remain largely unresolved. And they will accomplish far less than reforms.

 

Reforms in agriculture, which swallows trillions in subsidies for power, diesel, water, and fertiliser, would deliver real efficiency gains that would dwarf any voluntary austerity measures that farmers may undertake — which they probably won’t anyway, given the way they are politically mollycoddled by all parties. A simple way to start the process would be to price fertilisers at market rates, and shift the subsidy to cash payments per acre of farmland — which would force farmers to rethink how much fertiliser they use. The less they use, the more they save.

 

Then there is the perverse incentive to use private vehicles due to the poor quality of public transport. In 2025-26, Indians bought over 26 million personal vehicles (four-wheelers and two-wheelers), aided further by goods and services tax (GST) cuts in September 2025. Add this to the stock of 310 million two- and four-wheelers already on the roads at the end of the previous year, and the calculation is simple: Roughly one in four Indians now has access to a personal vehicle, though this is an oversimplification as many families may own multiple vehicles, and others may not even own a bicycle. But it underscores our overemphasis on personal transportation.

 

The underlying reason for this is the abject failure of public transportation in India, which has over the past few decades forced Indians to seek refuge in vehicle ownership. The growth of metros and suburban railways has not kept pace with commuter demand. Moreover, when public transport is overcrowded, women workers will especially seek to avoid the congestion and physical crush that is unavoidable in buses and suburban trains.

 

Austerity calls on petro-fuels will be of marginal help when the alternatives to personal transport are poor. Next, there is the poor quality of urban services like water and power. In most gated communities in Bengaluru, and even in high-rise buildings in Mumbai or other metros, water demand is substantially met by tankers. With power supply being unreliable, most buildings need diesel generators to make sure that at least the lifts work when power fails.

 

Net result, the demand for diesel is equally difficult to curtail when water tankers and diesel generators are vital to life in metros. If water and power supplies were reliable, there would be no need for these diesel-guzzling vehicles to rush about town, spilling water and belching toxic fumes all along the way.

 

Our metros and flyovers are also not constructed to optimise fuel consumption. Unlike metros in most cities abroad, which are built underground so that the existing road space is not restricted, in India most metros are built above the ground to save on construction costs. And most flyovers are planned just to jump over a traffic hotspot, and have inadequate service roads to accommodate vehicles that need to go under them.

 

Let’s look at work-from-home (WFH), which requires reliable Wi-Fi or high-quality mobile internet. During Covid, when employees retreated to their homes by necessity, WFH worked well for those who needed to be on the internet most of the time; the rest managed with 4G and mobile hotspots and phones. But here’s the problem: If WFH has to be an effective alternative, it also has to be more reliable for the vast majority, and not just for software workers.

 

Now consider how Wi-Fi really comes to your home. The cable that enters your building lives a charmed life outside, as it is slung from rooftop to rooftop, and from treetop to lamp-post. So, when these exposed wires snap for one reason or another, there is an outage, making Wi-Fi connections prone to regular disruptions. Till these cables are finally pushed underground like piped gas lines, their reliability will not be as good as they ought to be.

 

 And, let’s not forget, WFH needs the H as much as the Wi-Fi. Homes in India are priced out of reach for most middle-class households as politicians and builders use regulatory hurdles to slow down land supplies in order to collect rents from scarcity. After Covid, rents also went through the roof. The underlying reasons for high home costs, whether for rental or purchase, are the massive restrictions and regulations governing land use and land availability. Politicians (and pliant bureaucrats) use their ability to control land supplies to extract hefty bribes for regulatory clearances — and this is the money that often finds use in purchasing votes and for private wealth accumulation. Consider why simple solutions like raising the floor-space index (FSI) can bring down land prices. A building with an FSI of four can build twice as many apartments as one with two, which means land costs can fall dramatically if politicians want it to happen. Even assuming that not all crowded areas can afford high FSI due to street congestion and infrastructure constraints, there is no reason why new suburbs with no limits to road infrastructure should not be significantly cheaper than they are now. But vested interests block any shift to a saner regulatory policy that increases the availability of cheaper land, and therefore affordable homes.

 

As for buying less gold, the problem is one of mixed signals. How can you ask households to buy less gold when our own central bank is going big on gold? How can you prevent gold buyers from assuming that the yellow metal can never lose value, when tariffs automatically push up gold prices in the domestic market? In 2024, the Narendra Modi government reduced gold import duties to bring down domestic prices; now, in calling for austerity, it is doing the opposite, thus making gold look even more lucrative as an investment.

 

Our problem is not austerity, for Indians have always had a penchant to save rather than spend. But for that to happen naturally, we need to think of more than just asking people to save fuel or work from home or buy less gold. We have to fix the underlying issues: Public transport, quality power and water supplies, sensible urban infrastructure, and lower land prices. And, of course, reform agriculture.

---

The author is a senior journalist