As PM Modi appeals, govt & India Inc set to operate on a war footing

After Prime Minister Narendra Modi’s fervent appeal to citizens to conserve fuel and cut unnecessary imports, the government is likely to soon hold stakeholder consultations, including with industry, on possible measures that could be undertaken to deal with the fallout of the West Asia war.

The finance ministry on Monday held internal deliberations following PM’s call and amid indications that the war might stretch out longer. Officials, however, ruled out any knee-jerk action, as that could impact sentiment. “Various options are being examined,” one of the officials said.

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Officials ruled out any curbs on outward remittances, including under the Liberalised Remittance Scheme.

They said such a move would not send the right signal. “Why would investors get in funds if they can’t take them out,” the official said. The LRS scheme can be used to make investments or purchasing assets available at lower valuations now, and expand India footprint globally, he said.

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There is a thinking on a guidance on work from home for companies and sectors that do not require physical presence of employees, the official said.

“There is no sign of the war abating…The Strait of Hormuz remains closed, disrupting energy supplies globally…the government is committed to ensuring supplies but there is a need to focus on both energy and forex conservation,” another official said, adding that stakeholders will be consulted on the steps.

On Sunday, President Donald Trump rejected Iran’s response to a US peace proposal, triggering a sharp rally in crude prices as the markets fretted over the war dragging out.

There have been suggestions by global economists that the government should raise petrol and diesel prices.

As per estimates, every $10 per barrel increase in oil prices sustained over a year could add roughly $13-14 billion to India’s import bill, equivalent to about 0.4% of GDP. Brent crude futures were up $2.39, or 2.36%, at $103.68 a barrel Monday.

Brent traded around $72 a barrel before the start of the war in late February, according to a Reuters report.

“Global crude oil prices are expected to remain higher for longer…You need to conserve fiscal space for any future contingencies,” ADB chief economist Albert Park said.