Indian government is preparing a major support plan to help businesses struggling due to the ongoing Iran war. Rising tensions in West Asia have disrupted supply chains, especially for industries such as textiles and glass, while also raising risks of inflation and slower growth for India, the world’s third-largest oil importer.
To cushion the impact, the government will provide sovereign guarantees for four years on loans extended by banks. This scheme is similar to the one introduced during the Covid-19 pandemic, which successfully supported travel and tourism firms at that time.
Under the new plan, banks will receive a 90% guarantee on loans up to ₹100 crore if borrowers fail to repay due to the crisis. The total guarantee package is expected to be worth ₹17,000–18,000 crore (around $1.83–1.94 billion).
This initiative is designed to encourage banks to lend confidently to small and medium enterprises (SMEs), which are among the hardest hit. By reducing the risk for lenders, the government hopes to keep businesses afloat, protect jobs, and maintain economic stability during uncertain times.
Officials believe this step will provide much-needed relief to industries dependent on imports from West Asia, while also ensuring that India’s growth momentum does not stall despite global shocks.