India Proposes $26.7 Billion Credit Guarantee Program
India plans sovereign credit guarantees on $26.7 billion in loans for firms affected by the Middle East crisis. This plan targets small Indian businesses.
India is preparing to implement sovereign credit guarantees on loans worth approximately $26.7 billion to protect businesses from the economic fallout of the Middle East crisis. This initiative primarily targets small and medium-sized enterprises, such as textile and glass manufacturers, which have seen their supply chains disrupted by the conflict involving the United States, Israel, and Iran.
As the world’s third-largest oil importer, the Indian government is moving to mitigate the risks of surging inflation and slowing economic growth. The proposed plan involves providing sovereign guarantees for four years to commercial banks, a move similar to the financial support provided during the COVID-19 pandemic.
The program is expected to cost the government between 170 billion and 180 billion rupees ($1.83 billion to $1.94 billion). Under the framework, the state would guarantee 90% of loans up to 1 billion rupees ($10.75 million) to safeguard lenders against potential defaults resulting from the regional instability.
This strategy mirrors the 2020 credit guarantee scheme that supported the travel, tourism, and manufacturing sectors during the pandemic. By providing these guarantees, the government aims to ensure that businesses can maintain operations and meet their financial obligations despite the volatile international environment.
