In an acknowledgement of the distress Indian businesses are facing in the backdrop of the West Asia crisis, the government has extended credit support of ₹2.55 lakh crore to industry, with a focus on smaller enterprises and airlines. The Union Cabinet on Tuesday announced the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 with an outlay of ₹18,000 crore. The depth of the distress is better fathomed when one considers that ECLGS 3.0 and 4.0 were rolled out during the Covid pandemic.
Under the latest scheme, the government will provide 100 percent credit guarantee on working capital loans extended to micro, small and medium enterprises, and up to 90 percent on loans to non-MSMEs and passenger airlines. The guarantee will be provided on additional credit of up to 20 percent of the peak working capital used during January-March 2026, up to a limit of ₹100 crore. For airlines, 100 percent of additional loans will be covered under the scheme with a cap of ₹1,500 crore per borrower. Loans of up to seven years, availed until March 31, 2027 will be eligible for guarantee. Borrowers will also have to meet other conditions, including maintaining standard loan accounts.
The scheme is a timely intervention to provide short-term liquidity support to businesses hit hard by supply chain disruptions and soaring raw material costs due to the West Asia conflict. The scheme will help MSMEs, which employ more than 30 crore Indians, meet working capital requirements, pay wages, procure raw materials and avoid closures. Scheduled airlines, which recently wrote to the government stating that their operations were on the verge of shutdown, can get loans of up to ₹5,000 crore under the scheme. The sector has been hit hard by the sharp increase in jet fuel prices and the depreciating rupee.
By not opting for a direct fiscal package and extending support through credit guarantees, the government has, for now, avoided placing an additional burden on its finances. While the move is fiscally prudent, timely and much-needed, it remains to be seen whether it will be sufficient—especially for the aviation sector, which has also petitioned for a temporary suspension of excise duty and lower value-added tax on jet fuel.
