PM Modi has called for austerity: The Northeast already lives in it

Prime Minister Narendra Modi’s austerity call — cut fuel use, avoid foreign travel, postpone gold purchases, switch to electric vehicles and embrace “Vocal for Local” — is being projected as a national economic response to the spiralling geopolitical crisis in West Asia.

But for India’s Northeast, the message carries an uncomfortable undertone: a region that already consumes less, earns less and contributes far less to import-driven inflation than India’s richer states may once again be asked to bear a disproportionate share of the adjustment burden.

The Centre’s concern is not misplaced. India’s import vulnerability has sharply intensified. Gold imports surged from $36.5 billion in 2022 to $58.9 billion in 2025, while crude oil prices remain hostage to escalating tensions across West Asia.

India’s total gold demand in the first quarter of 2026 alone touched ₹2.27 lakh crore — roughly $25 billion — up a staggering 99 per cent year-on-year in value terms, according to World Gold Council data. 

Investment demand jumped 54 per cent to 82 tonnes, overtaking jewellery demand for the first time in decades, reflecting rising public anxiety over inflation, currency weakness and volatile financial markets.

Against this backdrop, Modi has moved to craft a politics of restraint. His own convoy has reportedly been cut by nearly 50 per cent, ministries are being nudged towards carpooling and metro travel, and citizens are being asked to reduce discretionary imports and fuel consumption.

But the Northeast exposes the structural contradiction at the heart of this austerity narrative.

Unlike metropolitan India, where fuel conservation can partly emerge from behavioural shifts, the Northeast’s petroleum dependence is built into its geography. 

The region is not merely consuming fuel; it is burning diesel to compensate for terrain, distance, weak logistics and incomplete infrastructure integration with mainland India.

National transport inflation in April 2026 was effectively flat at minus 0.01 per cent. Yet that figure borders on statistical fiction in much of the Northeast, where the cost of moving goods bears little resemblance to Delhi’s inflation dashboard.

Trucks carrying vegetables, medicines, LPG cylinders and cement routinely navigate landslide-prone mountain roads, insurgency-sensitive corridors and flood-hit highways. Every additional rupee spent on diesel compounds into cascading retail price increases by the time goods reach Imphal, Aizawl, Agartala or Kohima.

This is precisely why headline inflation data understates the region’s economic distress.

India’s overall retail inflation stood at 3.48 per cent in April 2026. Rural inflation was higher at 3.74 per cent. Several Northeastern states technically reported lower inflation than the national average: Assam at 3.22 per cent, Meghalaya at 2.97 per cent, Manipur at 2.33 per cent and Tripura at 2.34 per cent. But these numbers conceal more than they reveal.

The region’s inflation structure is fundamentally different from that of India’s industrial heartland. Food and essentials account for a much larger share of household expenditure, while dependence on imported supplies remains acute. 

A supply disruption in the Siliguri Corridor or a transport blockade in Manipur can trigger localised price shocks that national CPI averages barely capture.

Even more revealing is the contradiction between consumption levels and inflation vulnerability. 

The Northeast’s per capita fuel consumption remains significantly below that of richer western and southern states, yet the region experiences disproportionately higher inflation sensitivity to fuel price increases because transportation costs are embedded into almost every economic activity.

In Manipur, diesel still powers nearly 36 MW of electricity generation, making fuel inflation not merely a transport issue but a direct energy-cost shock. Across the Northeast, biomass consumption rates remain three to four times higher than in many other parts of India, reflecting an incomplete energy transition and continuing dependence on traditional fuels. 

Yet at the same time, rapid road construction, border infrastructure expansion and rising SUV ownership are pushing up petrol and diesel demand.

That exposes the paradox of New Delhi’s development strategy. For nearly a decade, the Centre has aggressively promoted connectivity as the Northeast’s economic salvation — highways, tunnels, logistics corridors, border roads and transnational trade routes.

Oil and gas projects worth nearly ₹1 lakh crore are currently underway across the region. But infrastructure-led growth itself is now increasing petroleum dependence precisely when the government is asking citizens to consume less fuel.

In effect, the Centre is simultaneously incentivising mobility while discouraging fuel consumption.

The same contradiction is visible in gold consumption.

For policymakers in Delhi, gold imports represent pressure on foreign exchange reserves. For much of the Northeast, however, gold is not merely an imported luxury commodity. It functions as cultural capital, informal insurance and liquid savings in economies where banking penetration and financial diversification remain uneven.

The government’s appeal to defer gold purchases therefore risks colliding with deeply embedded social behaviour. Across India, gold inflation touched 40.72 per cent in April, while silver inflation crossed an extraordinary 144.34 per cent.

Yet Indians did not retreat from the market. Jewellery demand volumes fell 19 per cent, but spending still surged 47 per cent to ₹99,900 crore because consumers continued buying even at record prices. Investment demand through bars, coins and ETFs exploded instead.

That shift is politically significant. Indians are no longer buying gold merely for weddings or adornment; they are increasingly purchasing it as protection against uncertainty.

The Northeast’s economic psychology makes this trend even more pronounced. In rural and semi-urban parts of the region, gold continues to operate as an alternative financial system — collateral during emergencies, a hedge against crop uncertainty and an asset class often trusted more than volatile markets.

Asking such households to “consume less gold” without offering equally trusted financial alternatives risks sounding disconnected from regional realities.

What makes the situation even more politically sensitive is that the Northeast already absorbs a hidden inflation tax because of geography. The region remains one of India’s most supply-chain vulnerable zones.

Bandhs, ethnic unrest, monsoon damage and transport disruptions frequently interrupt the movement of essentials. During such disruptions, inflation behaves less like a macroeconomic indicator and more like a survival crisis.

Even when official inflation moderates, households continue paying elevated effective prices because transport margins remain structurally high.

That explains why economists increasingly warn that national inflation averages are becoming misleading indicators for frontier regions. India may celebrate retail inflation cooling below 4 per cent, but for a household in Tripura or Manipur paying inflated transport costs for every bag of rice, cooking oil canister or LPG refill, the lived experience of inflation is far harsher than the CPI suggests.

The political optics of austerity may therefore work better in television studios than in the marketplaces of the Northeast.

Cutting the Prime Minister’s convoy may generate symbolism, but it does not reduce the structural logistics premium imposed on the region. Appeals for fuel conservation do not alter the reality that trucks remain the lifeline of the Northeast’s economy. Asking citizens to reduce gold purchases does little for households using jewellery as informal financial security.

The deeper problem is that India’s inflation debate remains excessively Delhi-centric. Policymakers focus on headline CPI, import bills and macroeconomic stability, while frontier economies continue battling embedded transportation costs, chronic supply fragility and consumption insecurity.

The Northeast’s real inflation story is therefore not about whether CPI is 2.5 per cent or 3.5 per cent. It is about the structural cost of distance from India’s economic core — a cost that rises every time global oil markets tighten, highways close or supply chains fracture. And that hidden, geography-driven inflation tax, unlike temporary crude shocks, has never truly gone away.

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