Amid the intensified Iran War that has led to severe disruption in the global economy, the Indian government has come up with plans to give fiscal support
to the ailing businesses through sovereign credit guarantees on loans worth $26.7 billion or nearly Rs 2.5 lakh crore. As per the reports, the scheme is a versionof the Emergency Credit Line Guarantee Scheme (ECGLS) and would be valid for four years. The scheme is likely to provide a 90 per cent credit guarantee for loans from the National Credit Guarantee Trustee Company (NCGTC), and will cover the loss in the event of the borrower’s default. Due to the ongoing middle east crisis, businesses such as textile and glass makers, have been hit severely as they depend majorly on the exports. The growing$174-billion Indian textiles industryfaces key challenges such as surging crude oil prices, increasing raw material costs, sluggish demand, and a fresh wave of migration of workers. The industry was projected to reach $350 billion by 2030. But with the crisis unfolded on multiple fronts due to the war, key challenges erupt in the industry's growth story.
Sovereign guarantees for four years
As reported by Reuters, citing sources, the central government is planning sovereign guarantees for four years to banks that lend to businesses. Notably, similar guarantees were provided during the deadly COVID-19 pandemic. This would cost the government about 170 billion to 180 billion rupees ($1.83 billion to $1.94 billion).
India is planning to provide a guarantee of about 90% on loans up to 1 billion rupees ($10.75 million) to lenders in case borrowers default in the aftermath of the crisis in the Middle East, it said.
The Emergency Credit Line Guarantee Scheme (ECLGS) was announced as part of the Atma Nirbhar Bharat Package in 2020 with the objective to help businesses including MSMEs to meet their operational liabilities and resume businesses in view of the distress caused by the COVID-19 crisis.
The Indian Stock Market has also faced the heat of the Middle East crisis that has triggered global economic slowdown. The month of March has turned out to be more crucial for the stock market and for the January to March quarter, a broad sell-off in equities was registered. Nifty fell as much as 13% during the quarter.
