From Demonetisation to War-Time Appeals: The Political Economy of Anxiety, Nationalism and Burden-Shifting in Contemporary India
- Ramphal Kataria
Abstract
India today stands at a dangerous economic crossroads where geopolitical instability, domestic structural weaknesses, policy shocks, and political spectacle intersect. Prime Minister Narendra Modi’s recent appeal asking citizens to conserve fuel, avoid foreign travel, postpone gold purchases, reduce edible oil consumption, adopt work-from-home practices, and embrace austerity reflects not merely a temporary response to the West Asia crisis, but a deeper admission that the Indian economy is under severe stress. The irony, however, lies in the fact that the same government which repeatedly projected India as the world’s fastest-growing and most resilient major economy is now urging ordinary citizens to alter their lifestyles to save foreign exchange reserves and reduce pressure on the economy.
This essay critically analyses the broader political economy of India since 2014, examining how demonetisation, the Covid-19 lockdown, GST implementation, aggressive privatisation, weakening of public sector institutions, rising unemployment, shrinking consumption, and dependence on imports created a fragile economic structure long before the Iran-Israel-US conflict intensified. It further analyses how political narratives, electoral mobilisation, hyper-nationalism, and media management were repeatedly used to conceal economic distress while structural inequalities widened.
The essay argues that the present austerity appeals disproportionately burden workers, farmers, small traders, goldsmiths, informal labourers, and middle-class households, while large corporate defaulters, speculative capital, and elite consumption remain largely insulated. It explores the contradiction between nationalist rhetoric and economic vulnerability, and questions whether civic discipline alone can rescue an economy weakened by policy shocks and institutional erosion.
Introduction: From “Everything Is Fine” to “Please Conserve Fuel”
For nearly a decade, the Indian public was repeatedly told that the economy was stable, resilient, and on the verge of global dominance. The ruling establishment projected an image of unstoppable economic ascent through carefully choreographed political communication, international summits, infrastructure announcements, and the repeated invocation of India becoming a “five trillion-dollar economy.” Economic criticism was frequently dismissed as pessimism, political propaganda, or anti-national negativity.
Yet the sudden shift in tone after the escalation of the Iran-Israel-US conflict has exposed a stark contradiction between political projection and economic reality. Prime Minister Narendra Modi appealed to citizens to conserve petrol and diesel, avoid foreign travel, postpone gold purchases, reduce edible oil consumption, and even revive work-from-home practices to conserve national resources and foreign exchange reserves. Such appeals are not routine economic advisories; they are signals of stress within the economic structure.
The irony is profound. A government that repeatedly insisted there would be little impact of the West Asia conflict on India is now effectively asking citizens to prepare for austerity. The appeals indicate anxiety over rising crude oil prices, pressure on foreign exchange reserves, weakening of the rupee, inflationary pressures, and the possibility of slowing economic growth.
The larger issue, however, is that the present crisis did not emerge overnight because of the West Asia war. The war merely exposed vulnerabilities that had accumulated over years due to policy shocks, shrinking employment opportunities, declining purchasing power, weakening public institutions, rising inequality, and dependence on imports.
“The West Asia crisis did not break the Indian economy. It merely revealed how fragile it had already become.”
The austerity narrative, therefore, must be examined not as an isolated response to a geopolitical crisis, but as the culmination of years of economic strain concealed beneath political spectacle and nationalist messaging.
The Political Timing of Economic Truth
One of the most striking aspects of the present crisis is the timing of the government’s admission. For months, the political discourse remained dominated by elections, rallies, media campaigns, and claims of economic stability. Even while economists warned about rising crude oil prices, weakening consumption, increasing fiscal stress, and vulnerability to global supply-chain disruptions, the ruling establishment maintained that India remained insulated from external shocks.
The government repeatedly assured the public that fuel supplies were secure, inflation was manageable, and the economy was fundamentally strong. Political campaigns proceeded with enormous expenditure and intensity across several states. Public attention remained focused on electoral arithmetic rather than economic vulnerability.
Then, almost immediately after the conclusion of elections, the language changed dramatically. Citizens were suddenly urged to reduce consumption, avoid imports, save foreign exchange, and embrace restraint in daily life. This sequence has naturally raised questions about whether economic realities were deliberately downplayed during the election season to avoid political damage.
Most democratic countries facing severe economic crises openly addressed their citizens through parliament and national communication. Governments in countries such as United Kingdom, Australia, Germany, France, and Japan publicly acknowledged inflationary challenges, energy shortages, and supply-chain disruptions following global geopolitical instability. Emergency economic plans, parliamentary debates, and transparent policy discussions accompanied these acknowledgements.
In India, however, there appears to have been a deliberate attempt to maintain the perception that “all is well” until electoral necessities had passed. The problem with such political management is that economies cannot be indefinitely sustained through narrative control.
Demonetisation: The Beginning of Structural Economic Disruption
Any honest assessment of India’s present economic fragility must begin with demonetisation, arguably the most disruptive economic decision in independent India’s modern history. On 8 November 2016, the Modi government invalidated ₹500 and ₹1000 currency notes overnight, removing nearly 86 percent of the currency in circulation.
The decision was justified as a revolutionary strike against black money, corruption, counterfeit currency, and terrorism financing. Citizens were told that hidden wealth would be destroyed and the economy would emerge cleaner and stronger. Instead, the move paralysed India’s cash-dependent economy.
India’s economic structure in 2016 relied heavily on cash transactions, especially in agriculture, small trade, transport, construction, informal manufacturing, and daily wage labour. Overnight, economic transactions froze. Farmers struggled to purchase seeds and fertilisers. Small traders lost customers. Labourers were denied wages because employers had no valid cash. Long queues outside banks became symbols of economic confusion and social distress.
The informal sector, which employed the overwhelming majority of India’s workforce, suffered devastating consequences. Small manufacturing clusters in textiles, leather, handicrafts, metal works, and local trade experienced collapse-like conditions. Many enterprises that depended on daily cash rotation never recovered.
“Demonetisation promised to destroy black money but ended up destabilising the foundations of India’s cash-driven economy.”
The tragedy of demonetisation was not merely its immediate economic shock, but the long-term erosion of confidence. A functioning economy depends not only on money but on predictability and institutional trust. Demonetisation signalled that economic rules could change overnight through executive announcement.
The government later celebrated the rise in digital transactions as proof of success. Yet this ignored the deeper reality that millions had been pushed into distress without adequate infrastructure, preparedness, or protection. Informal businesses weakened while large corporations with digital capacity expanded their market dominance.
Former Prime Minister Manmohan Singh described demonetisation as “organised loot and legalised plunder,” warning that it would damage India’s GDP and employment generation. Economists such as Amartya Sen and Raghuram Rajan also expressed concern regarding the economic consequences of abrupt monetary disruption.
The most painful reality is that almost the entire invalidated currency eventually returned to the banking system, exposing the hollowness of the black money argument. But by then, millions of livelihoods had already suffered irreversible damage.
GST and the Burden on Small Enterprises
The implementation of the Goods and Services Tax Council was introduced as a transformational tax reform intended to create a unified national market. In theory, rationalisation of indirect taxation was a necessary reform. However, the execution of GST created enormous difficulties, particularly for small and medium enterprises.
Small traders and businesses that had barely survived demonetisation were suddenly confronted with complex filing requirements, frequent changes in tax rules, digital compliance burdens, delayed refunds, and severe working capital pressures. Large corporations adapted relatively quickly due to better financial and technological resources. Small businesses did not possess such capacity.
Traditional industrial clusters across India experienced significant distress. Textile units in Surat, small manufacturers in Ludhiana, handicraft clusters, transport operators, and local traders repeatedly protested against the compliance-heavy structure of GST. For many small entrepreneurs, the reform did not represent simplification; it represented bureaucratic exhaustion.
The combination of demonetisation followed by GST proved economically disastrous for India’s informal and semi-formal sectors. Many enterprises that survived the currency shock collapsed under tax compliance pressures.
The most concerning aspect was that employment generation weakened sharply during this period. India’s economy increasingly became concentrated in the hands of larger organised entities, while smaller local businesses lost competitiveness.
Covid-19 Lockdown: Economic Shutdown and Humanitarian Trauma
If demonetisation destabilised India’s economic structure, the Covid-19 lockdown shattered its social foundations. India imposed one of the strictest lockdowns in the world with only a few hours’ notice in March 2020. Factories closed overnight, transportation stopped, markets shut down, and millions of workers instantly lost employment.
The most haunting images of the pandemic were not of hospitals or government briefings, but of migrant workers walking hundreds of kilometres back to their villages carrying children, luggage, and despair. Daily wage earners suddenly had no income. Construction workers were abandoned at work sites. Street vendors disappeared from city roads. Small businesses collapsed under prolonged closures.
The lockdown disproportionately affected migrant labourers, domestic workers, artisans, transport workers, restaurant employees, retail traders, and countless informal-sector workers who depended on daily income for survival. While large technology corporations expanded during the pandemic, millions of small and medium enterprises shut permanently.
The economic consequences were devastating. Household savings depleted rapidly. Debt increased. Educational inequality widened due to digital exclusion. Malnutrition concerns rose among poor families. The middle class also faced salary cuts, layoffs, medical expenses, and rising insecurity.
The government highlighted welfare schemes and ration distribution, but these measures could not compensate for the destruction of employment and local economic networks.
“The informal worker cannot work from home, cannot hedge inflation, and cannot survive prolonged economic uncertainty.”
Even years later, many small industries have not recovered from the lockdown shock. The economic trauma of Covid remains embedded within India’s labour market and consumption patterns.
NITI Aayog’s Construction Ban Advisory: A Sign of Deep Economic Anxiety
Perhaps the clearest indication of the seriousness of the present crisis emerged from reports that NITI Aayog advised the Union government to suspend major construction and demolition activities across India for two years due to spiralling costs, rising imports, and supply-chain disruptions caused by the West Asia conflict.
The advisory reportedly included deferment of reconstruction projects involving major ministerial complexes such as Nirman Bhavan, Udyog Bhavan, and Shastri Bhavan. Such a recommendation is extraordinary because construction is one of the largest employment-generating sectors in India.
Construction supports millions of workers:
migrant labourers,
masons,
carpenters,
electricians,
plumbers,
transport operators,
cement suppliers,
steel traders,
and informal daily-wage workers.
A large-scale slowdown or suspension in construction activity would create a severe chain reaction across the economy. The real estate sector, infrastructure projects, urban employment, and ancillary industries would all suffer.
The advisory also reveals that the government fears rising import bills for raw materials and worsening foreign exchange pressures. India’s dependence on imported energy and industrial inputs has created structural vulnerability that becomes highly visible during geopolitical crises.
What makes the situation politically striking is that such alarming recommendations emerged despite repeated official claims that the economy remained strong and resilient. If a two-year construction restraint is being seriously discussed, it indicates that policymakers themselves recognise the depth of the economic challenge.
Privatisation and the Shrinking Role of the Public Sector
The post-2014 economic model increasingly promoted privatisation as a central policy direction. Public sector undertakings, long considered instruments of strategic national development, were gradually opened to disinvestment, strategic sale, or private operational control.
Among the most notable developments was the privatisation of Air India, once a national symbol. Similarly, partial disinvestment of Life Insurance Corporation of India reflected the government’s broader strategy of monetising public assets.
Major airports including Mumbai Airport, Ahmedabad Airport, Lucknow Airport, and others increasingly came under private management.
Critics argued that public assets built over decades through taxpayers’ money were being transferred into concentrated corporate hands. Concerns also emerged regarding labour rights, contractualisation, monopoly formation, and the weakening of public accountability.
Supporters of privatisation argued that private participation improves efficiency and reduces fiscal burdens. However, the central question remains unresolved: can a country with massive unemployment and deep regional inequality rely excessively on privatisation while simultaneously shrinking avenues of stable public-sector employment?
The Work-from-Home Appeal and the Reality of India’s Labour Force
One of the most controversial aspects of the Prime Minister’s austerity appeal was the suggestion that people should revive work-from-home practices to save fuel and reduce economic pressure.
The appeal may appear logical from the perspective of urban corporate offices, but it reveals a profound disconnect from the realities of India’s labour market.
India’s workforce is overwhelmingly informal and physically dependent. Factory workers cannot operate machinery from home. Agricultural labourers cannot cultivate fields online. Construction workers cannot build infrastructure through video meetings. Drivers, delivery workers, sanitation workers, street vendors, domestic workers, artisans, and transport labourers depend on physical mobility for survival.
For millions of Indians, “work from home” is not a practical option but an elite urban privilege.
The appeal unintentionally exposed how policymaking increasingly reflects the worldview of upper urban classes rather than the lived realities of workers and informal labour.
The Gold Economy and Livelihood Destruction
The Prime Minister’s appeal to avoid purchasing gold for one or two years was framed as a patriotic effort to conserve foreign exchange reserves. Economically, India’s gold imports certainly place pressure on the current account deficit during periods of rising global uncertainty.
However, reducing the issue merely to foreign exchange management ignores the social and economic ecosystem surrounding the gold industry.
India’s jewellery sector employs nearly fifty lakh workers directly and indirectly. This includes goldsmiths, polishers, artisans, craftsmen, transport workers, retail jewellers, wedding-sector workers, and small family-run businesses across urban and rural India.
A prolonged decline in gold demand would devastate these livelihoods.
Gold in India is not merely a luxury commodity. For millions of families, especially women in rural and semi-urban households, gold functions as a form of social security and cultural savings. Weddings, festivals, and family traditions are deeply connected with jewellery purchases.
“Austerity imposed on the poor while wealth concentration deepens is not patriotism; it is economic displacement of pain.”
The burden of reduced consumption would therefore fall disproportionately on small artisans and workers rather than wealthy investors.
Nationalism as Economic Management
A recurring feature of recent political discourse has been the transformation of economic sacrifice into nationalist duty. Citizens are asked to consume less, travel less, buy less, and endure inflation in the name of patriotism and national resilience.
Economic hardship is reframed as civic morality.
This political method allows structural economic weaknesses to be converted into narratives of collective sacrifice. However, patriotism cannot substitute institutional planning.
If citizens are asked to sacrifice, questions naturally emerge:
Will political extravagance also reduce?
Will expensive government publicity campaigns stop?
Will elite consumption patterns change?
Will large corporate tax defaulters face aggressive recovery?
Without equitable burden-sharing, austerity risks appearing selective and unjust.
Conclusion: Spectacle Can Win Elections, But Not Rescue an Economy
India today faces a crisis far deeper than temporary inflation or oil-price volatility. The present austerity appeals expose accumulated structural weaknesses that have emerged through years of disruptive policy decisions, shrinking employment generation, weakening purchasing power, and increasing economic concentration.
Demonetisation destabilised the informal economy.
GST burdened small businesses.
The Covid lockdown shattered labour networks and MSMEs.
Privatisation concentrated assets and weakened public employment.
Import dependence increased vulnerability.
Geopolitical conflict merely exposed these weaknesses.
Yet instead of transparent democratic discussion, the public was repeatedly told that the economy remained strong and insulated from global crises.
Now ordinary citizens are being asked to bear the burden through reduced consumption and behavioural restraint.
“An economy cannot be sustained by slogans when purchasing power weakens, employment shrinks and inequality deepens.”
The present moment demands honesty rather than spectacle. Parliament must discuss the crisis openly. Economists, labour representatives, farmers, opposition parties, industry bodies, and state governments must participate in preparing a national response.
History shows that nations overcome crises through transparency, institutional trust, equitable burden-sharing, and structural reform — not through denial and symbolic nationalism.
The challenge before India is not merely economic. It is democratic, moral, and civilisational.
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