Navigating the West Asia Crisis: CII’s 20-Point Roadmap for India’s Fiscal, Financial and Trade Response

In response to the evolving situation arising from the conflict in West Asia the Government of India and the RBI took a series of timely, well calibrated and coordinated measures, reflecting a high degree of policy responsiveness and coordination across fiscal, administrative and monetary domains.

These steps have helped steady market sentiment and highlight the effectiveness of India’s policy framework in responding to external disruptions while maintaining resilience.

As 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.

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.

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.
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.
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.
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, reduce 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.
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.
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.
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.
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 temporary waiver of the ~2.5% customs duty on LNG imports.
In order 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.
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.
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.
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 protection of vulnerable beneficiaries.
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.
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.
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.
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.
Priority sector lending (PSL) norms may be revisited to enable banks to respond more flexibly to sector-specific stress during external disruptions. In addition, development of Credit Information Company (CIC)-based infrastructure financing frameworks could help accelerate credit appraisal and disbursement for critical infrastructure projects.
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.
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.
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.

As global uncertainties persist, the agenda provides a comprehensive pathway to reinforce liquidity, ease operational constraints and strengthen trade and financial resilience, particularly for the most vulnerable segments of industry. With continued coordination between the Government, the RBI and industry stakeholders, India is well placed to not only navigate the current disruption but also build a more agile and shock-resilient economic framework for the future.