Whalesbook
India's government is considering more support for vulnerable sectors like Micro, Small, and Medium Enterprises (MSMEs) and exporters if the West Asia crisis continues. This comes as global crude prices rise and supply chains face growing disruptions, putting pressure on the domestic economy.
Global Oil Prices Surge, Impacting India
Global crude oil prices have jumped nearly 50 percent since late February, fueled by geopolitical tensions in West Asia and retaliatory actions. International oil benchmarks briefly hit $119 per barrel this month before slightly easing. India, which imports about 88 percent of its crude oil, is particularly vulnerable to price increases. Key supply routes pass through the Strait of Hormuz, raising worries about potential disruptions.
Government Acts to Stabilize Fuel Supply
To combat these pressures, the government has already taken several steps. These include lowering excise duty on petrol and exempting diesel, aimed at stabilizing domestic fuel prices. Export duties have also been put back on diesel and aviation turbine fuel (ATF) to ensure domestic supply as global availability tightens.
Exporters Get Support for Costs and Risks
The Directorate General of Foreign Trade has increased support for exporters facing shipping difficulties and rising costs. The new Resilience & Logistics Intervention for Export Facilitation (RELIEF) scheme, worth ₹497 crore, aims to cover higher shipping costs, insurance, and war risks. Full benefits under the RoDTEP scheme have also been reinstated for exporters until March 31.
Economic Outlook Mixed Amid Global Tensions
A recent Monthly Economic Review highlighted these risks, noting that challenges are causing higher costs and supply limits. Chief Economic Advisor V Anantha Nageswaran emphasized the need for focused relief for businesses and households, while also keeping government finances healthy. The report suggests that although strong domestic economic foundations provide some buffer, the near-term outlook is uncertain, with the West Asia crisis posing risks to growth.