Government Relief Measures Amid West Asia Crisis
The government is considering additional relief packages for vulnerable segments of the economy, particularly the MSME sector, to sustain them and control inflation if the West Asia crisis persists.
- The government has already implemented measures such as cutting excise duty on petrol and diesel to protect vulnerable economic sectors.
- Excise duty on petrol has been reduced to Rs 3 per litre, and diesel has been exempted from duty to shield consumers from rising global crude prices due to the West Asia conflict.
- Duties on the export of diesel and aviation turbine fuel (ATF) have been reinstated to improve domestic availability.
Impact of Global Crude Oil Prices
- Global crude prices surged by almost 50% after the US and Israel launched military strikes against Iran.
- International oil prices reached $119 per barrel but later decreased to around $100 a barrel.
- India imports 88% of its crude oil needs, primarily through the Strait of Hormuz.
Export Support and Resilience Scheme
- The government introduced the Resilience & Logistics Intervention for Export Facilitation (RELIEF) scheme worth Rs 497 crore to support exporters facing challenges due to the West Asia crisis.
- The scheme aims to maintain supply chain resilience, protect MSME exporters, prevent order cancellations, and safeguard jobs.
Restoration of RoDTEP Benefits
- Full benefits under the RoDTEP scheme were restored to support exporters facing increased freight costs.
- The government had previously halved the rate of duty benefits under the scheme, prompting protest from the exporting community.
Geopolitical Risks and Economic Outlook
- Security concerns around the Strait of Hormuz have led to vessel diversions, congestion, and higher logistics costs.
- Chief Economic Advisor V. Anantha Nageswaran emphasized the need for targeted relief and strategic spending adjustments.
- The Monthly Economic Review highlighted risk factors such as higher input costs and supply constraints but noted strong macroeconomic fundamentals and domestic demand as potential buffers.
