More economic safeguards on the cards as West Asia conflict persists: Report

The government is preparing additional policy interventions to insulate the Indian economy from the fallout of the West Asia conflict, with officials indicating that fresh steps will be rolled out as needed rather than through a single large package, according to a report by The Times of India's Sidhartha.

The focus of the proposed interventions will be to ensure adequate availability of goods, raw materials, industrial inputs and finished products for domestic consumption, while also maintaining stability in the rupee and foreign exchange flows.

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“More steps will be announced. We will respond with more measures, as and when required,” an official told ToI.

Centre has opted for a calibrated response rather than announcing a broad package of measures at one go. The approach marks a departure from the strategy adopted during the Covid-19 pandemic, when the Centre and the Reserve Bank of India (RBI) unveiled multiple support measures in batches.

Calibrated response to emerging risks

The report said policymakers are drawing on their experience of handling successive global disruptions over the past six years, including the Covid-19 pandemic, the Russia-Ukraine conflict and shipping disruptions triggered by the hostage crisis in Israel.

Instead of pre-emptively rolling out a large set of measures, the government is addressing challenges as and when they emerge, officials were quoted as saying.

The latest interventions came this week, with the government and the RBI taking coordinated policy measures to encourage overseas investment in government bonds and other financial instruments.

Centre also approved a package aimed at shielding airlines from the impact of elevated crude oil prices, while extending support to oil marketing companies facing higher energy costs.

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Supply concerns addressed

Government officials told TOI that concerns related to the supply of petrochemicals and cotton have also been addressed.

At present, there are no major concerns from the manufacturing sector, with the availability of critical industrial inputs remaining adequate, they added.

On the external trade front, officials indicated that exports have remained resilient despite global uncertainties. Notably, the first two months of the current fiscal year have witnessed double-digit export growth following the announcement of a support package for exporters.

However, officials remain cautious about the trade deficit amid persistently high crude oil and gold prices.

“We are keeping a close watch on it and seem to be fine this quarter,” an official told ToI.

Subsidy burden may emerge as challenge

The report noted that the government may also have to contend with rising subsidy costs in the coming months.

Higher fertiliser prices and the cost of providing cooking gas cylinders to households have the potential to put pressure on the government's fiscal calculations.

With geopolitical tensions continuing to fuel uncertainty in global commodity and energy markets, the Centre is expected to remain on alert and deploy additional policy measures if required to safeguard economic stability.