The rich must do their bit—the middle class and poor mustn't bear the brunt of India's austerity drive

Subscribe to enjoy similar stories.Well, the first days are the hardest daysDon’t you worry anymore‘Cause when life looks like Easy StreetThere is danger at your door —Uncle John’s Band by Grateful DeadPrime Minister Narendra Modi’s recent austerity appeal is like an official acknowledgement that trouble is brewing in India’s economy. His exhortations seemed like a signal to all stakeholders that the time has come to talk about the Iran war’s direct and indirect effects.

On cue, speeches from various ministers followed, all echoing concerns about an impending crisis; even Reserve Bank of India (RBI) governor Sanjay Malhotra hinted that entrenched inflationary pressures may invite monetary policy intervention.The PM’s entreaties, followed by various officials hinting at harder times ahead, seem designed to dampen inflationary expectations. RBI’s latest bi-monthly survey shows households expecting a spike in the rate of inflation.

Unsurprisingly, the wholesale price index in April rose 8.3% from a year earlier, compared with 3.9% in March. After the recent fuel price hikes, expect the consumer price index to now rise.Yet, achieving the required level of austerity might be difficult because of entrenched cultural habits as well as certain sections of Indian society justifying extravagance through inter-generational entitlement and privilege.

In the end, though, like always, the middle-class and poor may have to bear the brunt.Signs of distress can be seen in external sector data. Balance-of-payments data for the January-March quarter is not yet available, making it difficult to assess the effect of the Iran war (the first shots were fired on the last day of February).