West Asia Crisis: From timely intervention to dedicated task force, what traders want from FM

As India continues to tackle trade and energy disruptions from the West Asia crisis, traders have sought timely government intervention to protect their interests, including the establishment of a dedicated task force with comprising representatives from key ministries along with the RBI, trade bodies and sectoral experts. Highlighting the crucial role of time government support for trade and industry, Member of Parliament and CAIT Secretary General Praveen Khandelwal has highlighted that areas like petrochemicals, chemicals, pharmaceuticals, plastics, packaging, textiles, fertilisers, paints, auto and auto ancillaries, logistics and transportation and energy-intensive industries are at risk due to the West Asia situation. In a letter addressed to the finance minister, he has sought government measures, including a financial relief for small traders and the formation of what he described as a 'West Asia Impact Assessment & Response Task Force' in this regard.

The body will, as suggested by Khandelwal, will assess the impact of the situation, recommend policies and coordinate response to continuously assess the evolving situation and recommend timely policy interventions, according to the letter dated April 6.

Here are key takeaways from Khandelwal's letter to the FM:

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India has shown resilience in past global disruptions: CAIT Secretary General

Despite rising global uncertainties, noted the letter, the country’s supply chain has remained resilient and robust. The government’s strategic approach has ensured the steady availability and prices of key goods such as food staples, instilling confidence across the trade and industry ecosystem and placing India in a relatively secure and stable position amidst global volatility.

The government measures, it noted, have included sourcing diversification, logistics infrastructure strengthening, prudent fiscal management and vigilant monitoring of essentials.

The trading community places on record its deep appreciation for the proactive, calibrated and timely measures taken by the government under the visionary leadership of Prime Minister Narendra Modi, noted the letter.

"His constant and close supervision of the evolving global situation, coupled with swift decision-making and inter-ministerial coordination, has ensured that India remains largely insulated from external shocks and continues to maintain economic stability," wrote Khandelwal.

Impact of West Asia crisis on Indian trade and industry

However, the continuing tensions in West Asia may have far-reaching consequences for several sectors of the Indian economy. "Given India’s dependence on the region for crude oil, energy supplies etc, any disruption could lead to increased input costs, supply constraints, and price volatility, thereby adversely impacting businesses—particularly small traders and MSMEs," read the letter.

It pointed out that the following sectors may be impacted over the medium to long term:

• Petrochemicals and chemicals
• Pharmaceuticals (bulk drugs & APIs)
• Plastics and packaging
• Textiles and synthetic fibres
• Fertilisers
• Paints
• Adhesives and specialty chemicals
• Auto and auto components
• Logistics and Transportation
• Energy-intensive industries

Exporters may face challenges including increased freight and insurance costs, shipment delays and route diversions, payment uncertainties in affected regions, reduced competitiveness in global markets, noted the letter.

What the trade and industry community wants

Khandelwal pointed out that the trade and industry community's main concern is about:

• Crude oil prices impacting overall cost structure
• Working capital stress due to escalating input costs
• Disruptions in supply chains and raw material availability
• Margin pressures (especially on small and medium enterprises)
• Increased financial burden on borrowers

Key Recommendations: Financial relief, export support, task force creation...

Here's a summary of the trader community's suggestions:

Financial relief and credit support

• Additional time and relaxation should be granted for repayment of loans to MSMEs and small traders
• A special credit guarantee line scheme should be introduced for affected sectors to ensure liquidity support
• Interest subvention should be provided for severely impacted industries

Monitoring and stabilisation measures

• Close and continuous monitoring of prices of key raw materials and essential commodities
• Appropriate steps to stabilise fuel prices to mitigate cascading inflationary effects

Export support measures

Temporary support should be provided to exporters in the form of:

• Freight assistance
• Insurance support
• Expedited refunds (GST, drawback, etc.)

A dedicated task force

"Given the dynamic and evolving nature of the situation, it is strongly recommended to constitute a “West Asia Impact Assessment & Response Task Force”, comprising officials from relevant Ministries like Finance, Commerce, Petroleum, MSME, etc., representatives from RBI, Trade and industry bodies and sectoral experts and economists," noted the letter.

The task force, it added, may continuously assess the impact of the crisis, identify sector-specific challenges, recommend timely policy interventions and act as a coordination bridge between the government and stakeholders.

FAQs related to the article

Q1 What has CAIT Secretary General flagged?

Praveen Khandelwal has highlighted the potential economic impact of the West Asia crisis on Indian trade and industry, especially MSMEs.

Q2 Which sectors are likely to be impacted?

According to the CAIT Secretary General's letter to the FM, sectors flagged include petrochem, pharma (APIs), plastics, textiles, fertilisers, auto and auto parts, logistics and energy-intensive industries are prone to Middle East disruptions.

Q3 Why is the Middle East crisis a concern for India?

India depends on the region for crude oil and energy supplies. Although the country has ramped up its domestic energy production and diversified its imports, disruptions could still increase input costs and trigger price volatility across sectors, say experts.

Q4 Are exporters facing any challenges?

Exporters are expected to face higher freight and insurance costs, shipment delays, route diversions, payment uncertainties and reduced global competitiveness, according to CAIT.

Q5 What kind of risks has traders' body CAIT highlighted?

The main anticipated risks include rising crude oil prices, supply chain disruptions, raw material shortages, margin pressure and working capital stress, especially for MSMEs.

Q6 What is the task force proposal?

Traders have sought a dedicated "West Asia Impact Assessment & Response Task Force” to monitor the situation, assess sectoral impact and recommend timely policy actions, according to CAIT.