West Asia Crisis: India Considers Further Economic Relief

Government May Announce More Relief Measures for MSMEs Amid West Asia Crisis​

Fresh Support Likely as Inflation Risks Rise​

New Delhi, March 29: The government is considering additional relief measures for vulnerable sections of the economy, including the MSME sector, as the ongoing West Asia crisis continues to exert pressure on inflation and supply chains, according to sources.

Officials indicated that the Centre has already taken multiple steps to shield consumers and businesses and remains prepared to introduce further support if the situation persists.

Fuel Duty Cuts and Export Controls to Stabilise Domestic Market​

As part of its recent interventions, the government reduced excise duty on petrol to ₹3 per litre and fully exempted diesel from duty. These measures aim to protect consumers from the sharp rise in global crude oil prices triggered by geopolitical tensions.

To ensure adequate domestic supply, duties on the export of diesel and aviation turbine fuel have also been reintroduced.

Crude Oil Prices Surge Amid Geopolitical Tensions​

Global crude prices have surged nearly 50 percent since February 28, when the United States and Israel launched military strikes against Iran, leading to retaliatory action from Tehran.

Oil prices touched USD 119 per barrel earlier this month before easing to around USD 100 per barrel.

India remains particularly exposed to such fluctuations, as it imports 88 percent of its crude oil requirements and about half of its natural gas, much of which passes through the Strait of Hormuz.

Exporters Receive Relief Through Policy Measures​

In response to disruptions in global trade routes, the government has introduced several measures to support exporters facing logistical challenges.

Earlier this month, exporters were granted relaxations in meeting export obligations due to difficulties in cargo movement linked to the crisis.

Additionally, the government launched the Resilience and Logistics Intervention for Export Facilitation scheme, with an allocation of ₹497 crore. The scheme is designed to offset rising freight costs, increased insurance premiums, and risks associated with war-related disruptions.

The initiative is expected to support MSME exporters, prevent order cancellations, and safeguard employment in the export sector.

RoDTEP Benefits Restored to Support Trade​

The government has also restored full benefits under the RoDTEP scheme to ease pressure on exporters dealing with elevated logistics costs.

The Directorate General of Foreign Trade confirmed that the rates and value caps applicable as of February 22, 2026, have been reinstated for the period from February 23 to March 31, 2026, covering all eligible export products.

This move follows concerns raised by exporters after the government had earlier reduced the benefit rates.

Supply Chain Disruptions Add to Economic Uncertainty​

Rising security concerns around the Strait of Hormuz have led to vessel diversions, longer shipping routes, congestion at transshipment hubs, and the imposition of emergency surcharges.

These disruptions have significantly increased logistics costs and created operational uncertainty for exporters moving goods through the region.

Economic Outlook Remains Cautious​

Chief Economic Advisor V Anantha Nageswaran highlighted the need for targeted relief to vulnerable businesses and households, alongside a re-prioritisation of government spending to address both immediate and long-term challenges.

The latest Monthly Economic Review noted that recent shocks are being transmitted through higher input costs and supply constraints, with early signs of moderation in economic activity.

While the near-term outlook remains uncertain due to external risks linked to the West Asia crisis, strong macroeconomic fundamentals and resilient domestic demand are expected to help cushion the overall impact.

India Faces Multi-Layered Risks from West Asia Crisis​

The report underscored that geopolitical developments have introduced complex risks for India, given its heavy reliance on energy imports and strong trade, investment, and remittance ties with the West Asia region.

As the situation evolves, policy responses are expected to remain focused on stabilising prices, supporting key sectors, and maintaining economic resilience.