Government will shield businesses from external shocks: FM Sitharaman

New Delhi: The government will not let the volatile external situation to affect Indian businesses, finance minister Nirmala Sitharaman said on Thursday, highlighting the measures taken to ensure collateral-free credit for them.

Speaking at a book fair and industrial exhibition in Daman, the minister said that a ministerial committee is reviewing cooking gas availability on a daily basis to ensure uninterrupted supplies.

Sitharaman said that because of the US tariffs on Indian exports and the West Asia war, Indian businesses, particularly small businesses, have faced challenges. Sitharaman referred to the steps taken by the government including collateral-free Mudra loans to small businesses and the emergency credit line guarantee scheme which was brought in during the covid period, and its latest version cleared by the Union cabinet on 5 May.

Under this, working capital is provided without collateral, on government guarantee. “The PM will not allow any negative impact on your business because of the external situation,” Sitharaman said.

The ECLGS 5.0 cleared by cabinet this week offers additional credit support to eligible businesses in view of the West Asia situation.

It seeks to faciitate additional credit flow of ₹2.55 trillion, including ₹5,000 crore for airlines. Under the scheme, credit guarantee coverage of 100% for micro, small and medium enterprises (MSMEs) and 90% for non-MSMEs as well as the airline sector, is offered, to lenders. It helps businesses tide over any short-term liquidity mismatches in view of West Asia crisis.

Now, war is happening on two fronts—between Ukraine and Russia and between Israel, US and Iran, because of which fertilizer price is rising and the movement of refined fuel is disrupted, Sitharaman said. The minister also said that a ministerial committee is reviewing the situation on LPG supplies on a daily basis.

Credit support has been a key element of India’s strategy to deal with shocks like covid and the West Asia war. Credit guarantees given by the government encourage banks to give loans without hesitation, and the default rate has been low.

Sitharaman urged businesses to step up operations in Daman and increase exports from the region, which will add to India’s foreign exchange earnings.