What Austerity

New India doesn’t know what it means. Price signals are a better way to influence its consumption choices

“Austerity” is a word people are using a lot this week. It means living carefully, spending less, and avoiding waste. But most Indians today have never really lived through a time of austerity. That’s because two out of every three Indians were born after 1991, the year India changed its economy and opened up to the world.

Before that, life was very different. Things were often hard to get. There were shortages, and people had to wait a long time for many products. Back then, finance minister Manmohan Singh said people still needed to save money and build the economy, but life should not become joyless. Still, the government at that time often controlled many things very strictly.

For example, in 1991, some people who got the chance to buy a new Maruti 1000 car were actually afraid to collect it because they worried tax officials might question them. Even buying a car needed patience, luck, and money because there simply weren’t enough cars available.

Today India is very different. We no longer live in a country of shortages. Companies make and sell huge numbers of vehicles. Things are usually available immediately in stores. Even during the current Hormuz crisis, fuel has still been available. So it’s true that many Indians don’t really know what austerity feels like. But that is actually a success, not a problem.

Some people worry that expensive imports and a weaker rupee mean the government should tell people what they can and cannot buy. India tried that kind of control before. In 1991, during another oil crisis caused by war in Iraq, some experts suggested limiting loans so people would buy fewer imported products.

But controlling people’s choices too much is probably not a good idea today, especially because people’s spending is a big part of India’s economy.

Instead, it may be better to let prices guide people. The government has already increased import taxes on gold and silver. If imported fuel, fertiliser, and other products become more expensive, people may naturally buy less of them. And if some people still want to travel abroad or drive more, they can do that while also paying more taxes. The idea is to trust the market and let it work on its own.

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