India Clears $1.9 Billion Loan Guarantee Plan As Iran War Hurts Firms, Airlines

(MENAFN- Live Mint) India's federal cabinet on Tuesday approved a credit guarantee plan with 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 that extend additional loans to eligible borrowers, according to a statement. The program is expected to“help businesses maintain their operations, protect jobs, and sustain supply chains,” it said.

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The emergency credit line guarantee across all sectors is similar to the relief that was provided during the Covid-19 pandemic to micro, small and medium firms, in the form of collateral-free automatic loans. Government data shows that more than 11 million guarantees worth 2.42 trillion rupees were given until March 2023.

The US and Israel's conflict with Iran has roiled the global economy and upended commerce. For India, the impact is particularly damaging given its reliance on energy imports - it's the world's third-largest oil consumer and gets about 90% of its gas shipments from the Middle East. This may make the Iran war as disruptive as the Covid pandemic six years ago, officials in New Delhi earlier said.

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The crisis in the Middle East threatens to knock India off its growth trajectory. Although the government is sticking to its forecasts of 6.8%-7.2% gross domestic product growth for the fiscal year through March 2027, several economists have already started to downgrade their projections. Goldman Sachs Group Inc. predicts 5.9% for 2026, while Oxford Economics Ltd. expects 6.2%.

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