CII praises Govt, RBI for swift response to West Asia conflict crisis

CII lauded the Govt and RBI for a swift, coordinated response to the West Asia conflict. It highlighted ongoing stress on MSMEs and exporters and proposed a comprehensive agenda for liquidity support, credit facilitation, and trade cost management.

Confederation of Indian Industry (CII) has commended the Government of India and the Reserve Bank of India (RBI) for a series of timely, well-calibrated and coordinated measures undertaken in response to the evolving situation arising from the conflict in West Asia. CII noted that the recent actions reflect a high degree of policy responsiveness and coordination across fiscal, administrative and monetary domains.

Commenting on the evolving situation, Chandrajit Banerjee, Director General, CII, stated that "the Government and the RBI have responded with speed, clarity and coordination. The early measures have helped stabilise sentiment and demonstrate that India's policy framework is both responsive and resilient in the face of external shocks."

At the same time, CII observed that the situation continues to evolve, with underlying supply side pressures in energy, logistics and trade channels persisting beyond the initial phase. Industry feedback indicates that while the first round of policy measures has mitigated the immediate impact, several sectors continue to face operational and financial stress, particularly MSMEs, exporters and energy-intensive industries.

Banerjee emphasised that "India's experience during previous crises has shown that coordinated fiscal and monetary action can significantly strengthen resilience. The next phase of policy response may therefore need to focus on targeted liquidity support, credit facilitation, trade cost management and foreign exchange stability."

CII's Proposed Agenda for Economic Resilience

Against this backdrop, and building on the strong foundation already laid by the Government and the RBI, CII has outlined a comprehensive and integrated agenda for immediate, short-term and longer-term consideration. The recommendations are intended to complement existing measures, address emerging gaps and ensure that the policy response remains ahead of the evolving situation.

Credit and Liquidity Support for Enterprises

One, the Ministry of Finance may consider introducing a time-bound Conflict-Linked Emergency Credit Line Guarantee Scheme (CL-ECLGS), similar in spirit to the Emergency Credit Line Guarantee Scheme (ECLGS) implemented during the pandemic, so that additional collateral-free working capital can be extended to affected enterprises through government-backed guarantees, particularly targeting MSMEs, exporters and gas-dependent sectors.

Two, the RBI may consider a temporary and clearly defined three-month moratorium and restructuring window for MSMEs, especially exporters and ancillary units linked to export supply chains. This may include calibrated flexibility in asset classification norms, with a defined deferment before Special Mention Account (SMA) and Non-Performing Asset (NPA) recognition is triggered, limited to sectors where disruption is demonstrable.

Three, the RBI could institute a Special Refinance Window for MSMEs and other affected sectors, complemented by targeted liquidity support through instruments such as Targeted Long Term Repo Operations (TLTRO), thereby enabling banks and non-banking financial companies (NBFCs) to continue extending credit at reasonable cost to productive sectors.

Four, the Ministry of Finance, in conjunction with RBI, could provide immediate contractual and operational relief to industry, especially MSMEs, by extending delivery timelines for Central and State PSU contracts by 3-4 months without invoking Liquidated Damages clauses, reducing Performance Bank Guarantee and Security Deposit requirements to minimal levels to ease liquidity constraints. In addition, temporary relief in electricity tariffs may also be offered to help manage rising input costs during the disruption period.

Five, banks may be enabled, for a limited period, to reassess and enhance working capital limits in deserving cases, particularly for export-oriented and gas-dependent units facing temporary stress. A calibrated increase in cash credit limits of up to twenty per cent, coupled with concessional lending terms during the disruption period, would provide meaningful operational relief.

Six, a temporary reduction or waiver of administrative banking charges, including loan processing fees, foreign exchange handling charges and documentation costs, may be considered for MSMEs and affected sectors.

Seven, the Trade Receivables Discounting System (TReDS) platform may be expanded more actively across affected industrial clusters to facilitate invoice discounting, while pending GST refunds, duty drawback claims and RoDTEP dues may be settled on a fast-track basis.

Fiscal Incentives and Tax Rationalisation

Eight, the Ministry of Finance may consider a time-bound rationalisation of the tax and duty structure on energy inputs to mitigate cascading cost impacts of the disruption. This could include a temporary waiver of the ~2.5% customs duty on LNG imports.

Nine, to sustain foreign capital inflows into primary markets during a period of heightened global uncertainty, the Ministry of Finance may consider a temporary exemption from long-term capital gains tax for foreign investors in primary market investments, with the qualifying holding period extended from two to three years. This calibrated incentive would signal stability, encourage patient capital, and help offset any flight-to-safety sentiment triggered by the disruption.

Ten, the Ministry of Finance may consider introducing accelerated depreciation benefits on capital goods, including domestically procured equipment, to stimulate private capital expenditure during the disruption period. In addition, GST input credit could be refunded on capital goods within 3-6 months. This would incentivise firms to front-load investment decisions, support domestic manufacturing capacity, and provide a counter-cyclical impulse at a time when business sentiment may be dampened by external uncertainty.

Institutional Frameworks and Long-Term Strategy

Eleven, over the medium term, institutionalising a standing MSME Crisis Response Framework, encompassing both a Logistics Relief Protocol and a Crisis Credit Facility, with pre-approved triggers that activate automatically within 48 hours of a declared supply chain disruption event. The framework could include provisions for time-bound working capital reassessment, expedited credit access, and logistics cost stabilisation, so that relief reaches MSMEs before the damage compounds.

Twelve, the Ministry of Finance may adopt a calibrated approach to subsidy management, particularly in fertilisers, by gradually transitioning towards Direct Benefit Transfer (DBT)-based delivery mechanisms, while improving targeting through linkage to landholding size, cropping patterns and soil health indicators. This would help balance fiscal prudence with the protection of vulnerable beneficiaries.

Thirteen, a special foreign exchange (forex) swap window may be considered for oil and gas public sector undertakings (PSUs), enabling them to meet their US dollar requirements in a manner that reduces volatility in the foreign exchange market and limits undue pressure on reserves.

Fourteen, the RBI may indicate an Open Market Operations (OMO) purchase calendar and undertake liquidity operations as required to ensure orderly conditions in the government securities market, prevent undue volatility in bond yields and maintain overall financial stability.

Fifteen, the Government may extend financial and institutional support to trade diversification efforts and development of alternative transport corridors, including initiatives that reduce dependence on a single geography for critical trade routes and energy logistics.

Sixteen, over the medium to long term, the Ministry of Finance and RBI in tandem could institutionalise a standing Economic Shock Response Framework with pre-agreed, scenario-based policy playbooks calibrated to defined trigger points such as including oil price thresholds at US$100, US$150, and US$200 per barrel, that bring together fiscal, monetary, trade, and regulatory levers with clear coordination protocols across ministries and regulators.

Seventeen, priority sector lending (PSL) norms may be revisited to enable banks to respond more flexibly to sector-specific stress during external disruptions. In addition, the development of Credit Information Company (CIC)-based infrastructure financing frameworks could help accelerate credit appraisal and disbursement for critical infrastructure projects.

Eighteen, over the medium term, a permanent Conflict-Linked Export Risk Support Facility may be established within the Export Credit Guarantee Corporation (ECGC), with predefined activation criteria and standardised support parameters to provide timely risk coverage during geopolitical disruptions.

Nineteen, stronger coordination between the Ministry of Finance, the Ministry of Commerce and Industry, the Export Credit Guarantee Corporation (ECGC) and the Export-Import Bank of India (EXIM Bank) may be undertaken to reinforce the export credit and insurance architecture and support exporters facing elevated freight, fuel and risk-related costs.

Twenty, an institutionalised inter-ministerial coordination mechanism may be established, including industry, to enable real-time monitoring of sectoral stress, facilitate seamless policy responses across fiscal, financial and trade domains, and ensure effective implementation of relief measures. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)