India’s federal cabinet on Tuesday approved a loan guarantee plan with a capital allocation of 181 billion rupees ($1.9 billion) to help businesses and airlines cushion the impact of the war in Iran.
The government will provide sovereign guarantees to lenders who will provide additional loans to eligible borrowers, according to the statement. The program is expected to “help businesses maintain their operations, protect jobs and maintain supply chains,” the company said.
The emergency credit framework guarantee across all sectors is similar to the relief provided during the Covid-19 pandemic to micro, small and medium enterprises in the form of automatic unsecured loans. Government figures show that more than 11 million guarantees worth 2.42 trillion rupees have been issued by March 2023.
The US-Israeli conflict with Iran has roiled the global economy and raised trade. For India, the impact is particularly damaging given its dependence on energy imports – it is the world’s third-largest oil consumer and gets about 90% of its gas supplies from the Middle East. This may make the Iran war as devastating as the Covid pandemic six years ago, officials in Delhi said earlier.
The crisis in the Middle East threatens to knock India off its growth trajectory. Although the government is sticking to its forecast for gross domestic product growth of 6.8% to 7.2% for the fiscal year to March 2027, several economists have already started to cut their projections. Goldman Sachs Group Inc. predicts 5.9% for 2026, while Oxford Economics Ltd. expects 6.2%.
