Industry lobby CII on Sunday outlined a 20-point agenda to mitigate the impact of the West Asia crisis, calling for measures including a temporary exemption from long-term capital gains tax for foreign investors in the primary market, the introduction of a time-bound Conflict-Linked Emergency Credit Line Guarantee Scheme and a three-month moratorium and restructuring window for MSMEs.
CII proposed that priority sector lending (PSL) norms may be revisited to enable banks to respond more flexibly to sector-specific stress during external disruptions. It also suggested that the RBI could institute a Special Refinance Window for MSMEs and other affected sectors, among other measures, seeking their consideration by the government.
Sustaining foreign capital inflows
To sustain foreign capital inflows into primary markets during a period of heightened global uncertainty, the Ministry of Finance may consider a temporary exemption from long-term capital gains tax for foreign investors in primary market investments, with the qualifying holding period extended from two to three years. This calibrated incentive would signal stability, encourage patient capital, and help offset any flight-to-safety sentiment triggered by the disruption, CII said.
It suggested that the Ministry of Finance may consider introducing a time-bound Conflict-Linked Emergency Credit Line Guarantee Scheme (CL-ECLGS), similar in spirit to the Emergency Credit Line Guarantee Scheme implemented during the pandemic, so that additional collateral-free working capital can be extended to affected enterprises through government-backed guarantees, particularly targeting MSMEs, exporters and gas-dependent sectors.
CII’s request to RBI
CII also called upon RBI to consider a temporary and clearly defined three-month moratorium and restructuring window for MSMEs, especially exporters and ancillary units linked to export supply chains. This may include calibrated flexibility in asset classification norms, with a defined deferment before Special Mention Account (SMA) and Non-Performing Asset (NPA) recognition is triggered, limited to sectors where disruption is demonstrable.
Moreover, the RBI could institute a Special Refinance Window for MSMEs and other affected sectors, complemented by targeted liquidity support through instruments such as Targeted Long Term Repo Operations, thereby enabling banks and non-banking financial companies (NBFCs) to continue extending credit at reasonable cost to productive sectors.
Besides, CII said, the Ministry of Finance in conjunction with RBI could provide immediate contractual and operational relief to industry, especially MSMEs, by extending delivery timelines for Central and State PSU contracts by 3-4 months without invoking Liquidated Damages clauses, reduce Performance Bank Guarantee and Security Deposit requirements to minimal levels to ease liquidity constraints.
In addition, temporary relief in electricity tariffs may also be offered to help manage rising input costs during the disruption period, it added. The industry lobby said banks may be enabled, for a limited period, to reassess and enhance working capital limits in deserving cases, particularly for export-oriented and gas-dependent units facing temporary stress.
A calibrated increase in cash credit limits of up to twenty per cent, coupled with concessional lending terms during the disruption period, would provide meaningful operational relief. It also called for a temporary reduction or waiver of administrative banking charges, including loan processing fees, foreign exchange handling charges and documentation costs, may be considered for MSMEs and affected sectors.
Other measures include expansion of the Trade Receivables Discounting System (TReDS) more actively across affected industrial clusters to facilitate invoice discounting, while pending GST refunds, duty drawback claims and RoDTEP dues may be settled on a fast-track basis.
Chandrajit Banerjee, Director General, CII, said, “The government and the RBI have responded with speed, clarity and coordination. The early measures have helped stabilise sentiment and demonstrate that India’s policy framework is both responsive and resilient in the face of external shocks.
At the same time, CII observed that the situation continues to evolve, with underlying supply side pressures in energy, logistics and trade channels persisting beyond the initial phase. Industry feedback indicates that while the first round of policy measures has mitigated the immediate impact, several sectors continue to face operational and financial stress, particularly MSMEs, exporters and energy-intensive industries.
“India’s experience during previous crises has shown that coordinated fiscal and monetary action can significantly strengthen resilience. The next phase of policy response may therefore need to focus on targeted liquidity support, credit facilitation, trade cost management and foreign exchange stability,” Banerjee said.
CII further suggested that the Ministry of Finance may consider a time-bound rationalisation of the tax and duty structure on energy inputs to mitigate cascading cost impacts of the disruption. This could include a temporary waiver of the about 2.5 per cent customs duty on LNG imports.