The government is bringing a $26.7 billion credit guarantee package for businesses affected by the Middle East conflict. This 4-year scheme will give banks 90% guarantee on loans. Its objective is to provide economic relief to distressed sectors like textile.
The Indian government is preparing a sovereign credit guarantee package of $ 26.7 billion (about Rs 2.5 lakh crore) to save businesses affected by the ongoing conflict in the Middle East. This scheme will run for four years. Under this, if a businessman is unable to repay the loan, the government will give 90% guarantee to the banks, that is, it will compensate for the loss.
Officials say that this scheme is similar to the Emergency Credit Line Guarantee Scheme (ECLGS) implemented during the Corona epidemic. At that time also similar guarantees were given to banks. The government may have to spend about 170 to 180 billion rupees (1.83 to 1.94 billion dollars) on this new package. Loans up to Rs 1 billion ($10.75 million) will be covered under this scheme. These guarantees will be managed by the National Credit Guarantee Trustee Company (NCGTC).
Most pressure on textile industry
Industries that depend on exports have been hit the hardest, especially the textile and glass industries. India’s $174 billion textile industry is struggling with problems like rising crude oil prices, expensive raw materials, declining demand and migration of workers. Earlier it was estimated that this industry would reach 350 billion dollars by 2030, but the war has put a brake on this growth.
The purpose of this step of the government is to provide some relief to these sectors, which are struggling to continue their work amid global economic uncertainty. Its pressure is clearly visible on the Indian stock market also. The month of March was full of ups and downs. Big selling was seen in stocks during the January to March quarter. The Nifty index fell by 13%, which shows investors’ concern about this crisis.
It is expected that this Sovereign Guarantee Scheme will stabilize the process of getting loans from banks and give them confidence. This will ensure that businesses continue to receive funds despite increasing risks. Even though the war is disrupting trade and supply chains, the government hopes this intervention will prevent deep economic losses and prevent industries from collapsing in difficult times.