What austerity?

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

Austerity is this week’s buzzword. But if majorities define societies, it’s fair to say India doesn’t know what austerity is anymore. That’s because two of every three Indians – a supermajority – living today were born after 1991, the year of Liberalisation.

The year we, as a nation, decided we’d had enough of poverty, shortages and austerity.

As Manmohan Singh, finance minister at the time, said in his budget speech, austerity was still needed to accumulate capital, but it needn’t be “negation of life or a dry, arid creed that casts a baleful eye on joy and laughter”. And the ‘austere’ Indian state was notorious for being a killjoy then.

Our March 4, 1991 edition reported that “allottees” of the new ‘Maruti 1000’ sedan were avoiding deliveries for fear of income tax raids. Allottees?

Yes, car ownership in that age of perpetual scarcity required patience and luck, besides ready cash.

We have banished scarcity, and how! Bajaj Auto’s 2000-01 annual report mentions monthly capacity of 50,000 bikes. Last month, the company sold 2.1L two-wheelers in India, and 2.3L abroad.

Overall, roughly 24L bikes were made in the country in April 2026. Everything’s available off the shelf. Even fuel, three months into the Hormuz crisis.

So, no, we don’t know what austerity is. And that’s an achievement, not a failing. But doesn’t it leave us ill-equipped to deal with high import costs and a weakening rupee? No.

Normative regulation – don’t do this, do that – was part of our pre-Liberalisation playbook. In Feb 1991, when America’s war on Saddam’s Iraq had created similar conditions, pundits were prescribing curbs on consumer credit to reduce imports.

But hobble-the-buyer is bad policy, especially now when private consumption expenditure exceeds 60% of GDP.

It’s far better to influence buying decisions with prices, as govt has already done with higher import duties on gold and silver. Let fuel, fertiliser, and other imports get costlier to reflect market realities. Consumption will find its own level.

And if some people still want to holiday abroad, or drive everywhere, they can do so, while filling state coffers. Trust the market, and let it work.