Petrol price hikes on the anvil? JM Financial warns of ‘Austerity Measures’ and phased fuel price increase

Indian equity markets reacted negatively to the PM’s speech, with brokerage firm JM Financial saying investors should brace for austerity measures in the coming weeks. They expect calibrated increase in fuel prices to start with. 

Expect calibrated policy measures

The brokerage believes India’s response to the oil disruption came later than some other countries due to assembly elections in five states. Several nations have already announced strict measures to reduce fuel usage, while the Philippines has declared a national energy emergency.

Going forward, JM Financial believes the government is likely to follow a gradual approach as it is not in panic mode yet. “Fuel prices may be increased in tranches, LRS limits may be reduced temporarily, and duty on gold imports may be hiked as the lean wedding season approaches,” JM Financial said.

Why Govt intervention is crucial for the economy now

Here is why JM Financial believes that government measures are now crucial for Indian equity and economy.

1. Coordinated policy measures needed to support rupee

JM Financial believes that the government should continue to address these issues through coordinated fiscal and monetary policies as these would “cushion the currency (INR) from further depreciation.”

The Indian rupee has depreciated nearly 10% against the US dollar in FY26, with analysts attributing around 4% of the fall directly to the West Asia conflict.

2. West Asia conflict may slow India GDP growth to 6–6.5%: JM Financial 

Government measures are also important as JM Financial believes that if the conflict continues for long India’s growth picture will face the worst case scenario. “We will stick to our worst case scenario of GDP growth moderating to 6–6.5% and CAD deteriorating to 1.9% of GDP. But a prolonged conflict could negatively impact inward remittances, further weakening the CAD.” 

Since the West Asia conflict began in February 2026, crude oil prices have remained above $ 100 per barrel, putting pressure on emerging economies like India. Indian rupee has weakened 10% against the dollar in FY26, nearly 4% of this decline is linked to the conflict. 

Foreign institutional investors (FIIs) also sold equities worth $12.7 billion in March 2026, taking total FY26 outflows to $19.7 billion.

3. Oil and gold remain key pressure points for India’s forex reserves 

PM Modi’s speech urging citizens to conserve forex reserves by curtailing gold imports, reducing fuel and fertiliser consumption, and cutting international travel is significant, as oil accounts for around 20% of India’s total imports, while gold makes up about 9% and fertilisers nearly 2%.

JM Financial noted that around 58% of outward remittances under the Liberalised Remittance Scheme (LRS), worth about USD 30 billion in FY25, were spent on international travel. Investments in overseas equities have also increased sharply, rising to 8.4% from 3.1% in FY19.

4. India should boost strategic oil reserves: JM Financial 

JM Financial also highlighted that the government should focus on increasing strategic petroleum reserves to manage such supply disruptions as Strait of Hormuz has increased inflation concerns as it has affected fuel supplies and other industrial raw materials. 

India remains vulnerable because nearly 90% of its crude oil requirement is met through imports, and around 30% of these imports pass through the Strait of Hormuz.

PM Modi’s speech highlight and govt measure so far

Prime Minister Narendra Modi asked citizens to use petrol, diesel and cooking gas carefully and avoid wastage. He also advised people to avoid non-essential foreign travel and postpone overseas trips for at least a year.

The prime minister specifically referred to the increasing trend of destination weddings and international vacations among the middle class. He also appealed to citizens not to buy gold for a year to reduce import pressure and conserve foreign exchange reserves.

The PM further urged farmers to reduce fertiliser usage by 50% and encouraged companies to adopt work-from-home arrangements wherever possible.

Despite crude oil prices crossing $120 per barrel at one stage, the government has so far kept retail petrol and diesel prices unchanged.

However, bulk diesel prices were raised by 25% to Rs 109.8 per litre, while commercial LPG cylinder prices increased 78% to Rs 3,024 per cylinder.