West Asia conflict | Early signs of stress visible across sectors: FICCI

New Delhi: Early signs of stress are visible across sectors, warranting proactive measures to mitigate immediate risks as well as to build long-term resilience, industry lobby FICCI said in a report on the implications of the West Asia conflict released on Thursday.

The report emphasises that this crisis, while being challenging, also presents an opportunity for India to accelerate structural reforms aimed at strengthening economic resilience and reducing external vulnerabilities.

The government may consider the provision of emergency financing for MSMEs and issuance of advisories to address force majeure-related risks in public procurement contracts, ensuring that businesses are not penalised for delays caused by factors beyond their control, says the report.

The report also suggests that the government may initiate consultations within the GST Council to explore a roadmap for the inclusion of petroleum products under GST. This would help reduce cost burdens, improve supply chain efficiency and enhance industry competitiveness, it argues.

The report also illustrates key policy interventions for building long-term resilience.

These include diversifying oil and gas sourcing through long-term agreements with multiple countries, expanding domestic gas infrastructure, and enhancing strategic petroleum reserves capacity. Scaling up renewable energy and clean technologies, including green hydrogen, battery storage, and biogas, will also be essential for achieving energy security, said the FICCI report.

In addition, the development of resilient trade infrastructure, such as alternative economic corridors and the strengthening of multimodal connectivity, has also been highlighted as a strategic priority.

Strengthening domestic manufacturing ecosystem and developing new manufacturing clusters to geographically diversify industrial capacity and reduce concentration risks will also be important, the report emphasised.

It has suggested a two-pronged strategy for the industry focused on financial resilience and operational continuity.

On the financial front, companies are advised to undertake scenario-based planning by developing a "Middle East Crisis" version of their budgets, with necessary actions to optimise sales, margins and capex depending on the sector's sensitivity to the crisis. Firms are encouraged to secure additional funding lines and hedge currency risks to protect cash flows.

At the same time, businesses must proactively assess the financial health and continuity risks of key suppliers and customers. Reviewing insurance coverage and strengthening cybersecurity protocols are also identified as critical components of risk management in an increasingly uncertain environment.

To address operational disruptions, the report outlines several short-term measures. These include prioritising demand and aligning production schedules with the availability of critical inputs, optimising logistics through shipment consolidation, and enhancing coordination with global shipping lines. Some companies have already established cross-functional "war rooms" to manage real-time supply shortages and ensure business continuity.

Flexibility and diversification of the energy mix are other key recommendations. Industry players are encouraged to explore multi-fuel options, including biofuels and electrification of processes, as well as increase reliance on alternative energy sources such as solar power, piped natural gas (PNG), and coke oven gas.

In parallel, firms should adopt energy efficiency measures, including conducting energy audits, optimising equipment usage, and leveraging AI-driven monitoring systems for operational efficiency, said the report.

It also highlighted the importance of ensuring diversification of supply chains for critical inputs.

Companies are encouraged to reduce dependence on specific geographies by expanding their global supplier base and developing domestic sourcing capabilities or undertaking backward integration of critical components, wherever feasible, the report suggested.