Comprehensive Economic Measures Amid West Asia Crisis
The government is actively planning measures to support the economy in light of the West Asia crisis, targeting various sectors including Micro, Small, and Medium Enterprises (MSMEs).
Planned Relief Measures
- A new ₹2.5 trillion credit guarantee scheme is under consideration to support businesses affected by the crisis.
- The scheme proposes a 90% credit guarantee on loans up to ₹100 crore in case of borrower defaults due to the US-Iran conflict.
- Implementation would be managed by the National Credit Guarantee Trustee Company.
Long-term and Immediate Economic Strategies
- The government is preparing for both immediate and long-term impacts, akin to the Covid-19 response strategy.
- Industry demands include relief packages similar to those announced during Covid-19, emphasizing the need for timely conflict-linked credit schemes and tax adjustments on energy inputs.
Historical Relief Packages
- In 2020, a ₹1.7 trillion package under the Pradhan Mantri Garib Kalyan Yojana and a ₹20 trillion stimulus under Atmanirbhar Bharat Abhiyan were announced.
- In 2021, a ₹6.28 trillion relief package supported the economy and health infrastructure.
Impact on Remittances and Labor
- A potential decline in remittances is expected in the near term due to the crisis.
- If the war prolongs, returning labor could pose challenges, though current migration remains stable.
Fiscal Measures and Oil Industry Support
- The Economic Stabilisation Fund allocation has been doubled to ₹1 trillion for FY26.
- Recent measures include reducing additional excise duty on petrol and diesel by ₹10 per litre.
- Export duties on diesel and aviation turbine fuel (ATF) have been reintroduced to secure domestic supply.
- A full customs duty exemption on critical petrochemical products has been announced.
Finance Minister Nirmala Sitharaman emphasized the fiscal space available for continued capital expenditure and targeted sectoral support, noting the shift from a landscape of shocks to one of permanent volatility.
