Govt may consider more relief packages for vulnerable sectors if West Asia crisis prolongs

International oil prices touched $119 per barrel earlier this month on the intensifying Iran war, before pulling back to around $100 a barrel.

New Delhi: The government may announce more relief packages for vulnerable segments of the economy, including the MSME sector, to help them sustain and keep inflation under check in the domestic market if the West Asia crisis prolongs further, sources said.

The government has announced a slew of measures, including cutting excise duty on petrol and diesel during the month and will not hesitate to announce more to shield the vulnerable sectors of the economy, sources said.

The government slashed the excise duty on petrol to Rs 3 a litre and exempted diesel from the duty to protect consumers from the impact of rising global crude prices amid the ongoing war in the Middle East.

Alongside, the government brought back duties on the export of diesel and aviation turbine fuel (ATF) to improve domestic availability.

Global crude prices have risen by almost 50 per cent since the United States and Israel launched military strikes against Iran on February 28, triggering sweeping retaliation from Tehran.

International oil prices touched USD 119 per barrel earlier this month on the intensifying Iran war, before pulling back to around USD 100 a barrel.

India imports 88 per cent of its crude oil needs and roughly half of its natural gas requirement. These mostly come via the Strait of Hormuz.

Earlier this month, the government granted certain relaxations to exporters in fulfilling their export obligations, as the trading community is facing difficulties in the movement of goods due to the ongoing West Asia crisis.

It also unveiled a scheme, Resilience & Logistics Intervention for Export Facilitation (RELIEF), worth Rs 497 crore to withstand some of the challenges related to extraordinary freight escalation, heightened insurance premiums, and war-related export risks that Indian exporters have been grappling with due to the war in the Middle East.

This intervention is expected to keep India's supply chains resilient, protect MSME exporters, prevent order cancellations and safeguard jobs in the export sector.

Subsequently, the government on Monday restored full benefits under the RoDTEP scheme to provide support to exporters facing elevated freight costs.

Last month, the government halved the rate of duty benefits under the Rodtep Scheme. The exporting community expressed disappointment and had sought reconsideration of the decision.

"The Rodtep rates and value caps as specified as applicable on February 22, 2026, are hereby restored with effect from February 23, 2026 to March 31, 2026 for all eligible export products," the Directorate General of Foreign Trade (DGFT) said in a notification.

Escalating security concerns around the Strait of Hormuz due to the United States-Israel war with Iran have led to vessel diversions, longer sailing routes, congestion at transhipment hubs and emergency conflict-linked surcharges. This has not only resulted in higher logistics costs but has also created operational uncertainty for export consignments moving to or through the region.

India will need to provide immediate relief to the most affected and vulnerable businesses and households, and at the same time, generate fiscal space to meet strategic and long-term needs that this conflict has underscored, such as the need to build long-term buffers in several commodities and materials, not just energy-related ones, Chief Economic Advisor V Anantha Nageswaran said.

This calls for re-prioritisation of spending and targeted relief for the most affected and vulnerable businesses and households, he said in the latest Monthly Economic Review released on Saturday.

The report further said the latest data reflect that the recent shocks are being transmitted through higher input costs, supply constraints, and pressures across sectors, with early indications of some moderation in economic activity.

The near-term outlook remains uncertain, with external shocks particularly the West Asia crisis posing downside risks to growth through elevated input costs and potential supply disruptions, it said.

However, the report said, strong macroeconomic fundamentals and robust domestic demand may help cushion the impact.

The geopolitical developments have introduced a complex and multi-layered set of risks for India, given its position as a major energy importer with strong trade, investment, and remittance linkages with the West Asia region, it added.