Indian officials say the Iran war could be as disruptive to the country as the Covid pandemic was six years ago and the damage could linger for years to come, threatening to knock the world’s fastest-growing major economy off its path. The government is now drawing on its Covid playbook to cushion businesses and consumers hit by gas shortages and soaring oil bills. One such measure could be a credit guarantee scheme worth 2tn-2.5tn rupees ($26.8bn) for small and medium firms and sectors, officials in New Delhi directly involved in managing the fallout said, asking not to be identified because the discussions are private. India’s reliance on energy imports — it’s the world’s third-largest oil consumer and gets about 90% of its gas from the Middle East — may make the Iran war as disruptive as the Covid pandemic six years ago, the officials said. Even if hostilities end soon, it could take years for supplies of energy products including liquefied petroleum gas to normalize as Gulf nations repair damaged facilities, they said. The Finance Ministry has mapped out multiple scenarios, including one that assumes crude oil prices average $120 a barrel for the full year, they said. The crisis has the potential to knock India off its growth trajectory. Although the government is sticking to its forecasts of 6.8%-7.2% for the fiscal year through March 2027, several economists have already started to downgrade their projections. Goldman Sachs Group Inc predicts 5.9% for 2026, while Oxford Economics Ltd expects 6.2%. Policymakers see India’s potential growth rate at 7%-7.5%, with scope to reach 8% without repeated shocks, the minimum needed to meet Prime Minister Narendra Modi’s economic agenda. Multiple channels are under strain at once, including the rupee, household purchasing power, Gulf remittances, fiscal space and private investment, said Alexandra Hermann, an economist at Oxford Economics. “The vulnerability is unusually broad-based,” she said. For now, the shock looks cyclical rather than structural, “but if high energy costs, subsidy pressures, and delayed private capex persist, then some of the cyclical damage could start bleeding into potential growth as well,” she said. Since February 28, when the US and Israel launched joint attacks on Iran, Prime Minister Narendra Modi’s government has taken several fiscal steps to shield consumers and support the economy. Officials say they have enough fiscal room to maneuver following years of spending restraint. The government has slashed taxes on diesel and gasoline to help keep prices stable at the pump, and providing a relief package to exporters catering to the Middle East region. It has also set aside an economic stabilization fund of $6.2bn to help the economy absorb global shocks. The proposed loan program now under consideration for small businesses would be similar to the one launched during the pandemic in May 2020 and offer 100% guaranteed and collateral-free loans to help firms cope with any liquidity crunch, officials familiar with the matter said. India’s Finance Ministry didn’t respond to a request for comment. During the pandemic, the fiscal deficit widened sharply to 9.5% of GDP in 2020-21 as the government rolled out stimulus. Combined support from the government and the RBI totaled 29.87tn rupees ($320bn), or about 15% of GDP, with measures including a loan repayment moratorium, corporate tax cuts and free food grains for migrant workers. For the current financial year, Finance Minister Nirmala Sitharaman targeted a fiscal deficit of 4.3%, but economists such as Anubhuti Sahay of Standard Chartered expect that to widen by 0.7 to 0.9 percentage point to above 5% of GDP after absorbing higher oil prices. Officials said budgetary projections for the current fiscal year may change due to the crisis, but the exact impact would only be clear in the second half of the year, once the government has enough data to assess. The combination of a surging energy import bill and a widening fiscal deficit is worrying foreign investors. Overseas funds have pulled nearly $19bn from local markets in the first few months of the year, close to the full-year record for 2025. That’s pushed the rupee past an all-time low of 95 per dollar, prompting the central bank to take some of its most aggressive steps in a decade to curb banks’ speculative bets. The Indian rupee rose 0.2% to 93.1975 on Thursday, while the 10-year bond yield rose 2 basis points to 6.89%. Indian stocks fell, with the Nifty 50 Index down 0.1%. The hit to both the economy and budget mainly comes from the spike in oil prices, which the government is absorbing for now. But that may not remain the case if the strait remains shuttered and prices stay elevated. “If the supply shock deepens, a gradual increase in retail fuel prices might be the next step,” said Radhika Rao, an economist at DBS Bank Ltd That could lead to “some degree of demand destruction,” similar to what was seen in 2022 after Russia’s invasion of Ukraine. In the first full month of the war, India’s exports and imports contracted in March from a year earlier, official data showed Wednesday. Shipments to the Middle East plunged by almost 58% or $3.5bn from the previous month, while imports fell by $8.7bn, or over 50%. Further clouding the outlook, inflation edged up in March amid concerns of below-normal monsoon rainfall. The Reserve Bank of India kept interest rates on hold last week and struck a cautious tone as growth comes under pressure. Some banks like Goldman Sachs and Standard Chartered say chances of rate hikes have increased as inflation pressure gain.

Europe has introduced its most significant overhaul of external border control in decades. It has also introduced a new point of friction into the passenger journey at precisely the moment the system faces its first real stress test.The Entry/Exit System, known as EES, became fully operational across the Schengen area on April 10. Its objective is clear. Replace manual passport stamping with a centralised digital system that records biometric data for non-EU travellers, tracks entries and exits, and identifies overstays with far greater accuracy. British, American and Gulf passengers arriving into Europe now provide fingerprints, a facial image and passport details at the border. In policy terms, the logic is sound. In operational terms, the execution is already under strain.Queues of several hours have been reported within days of full implementation. These are not isolated disruptions linked to a single airport or a temporary systems issue. They reflect a structural mismatch between how the system is designed to function and how airports actually operate at scale.The warning signs were visible well before April. EES was introduced in phases, gradually expanding coverage from a small proportion of travellers to full deployment. At each stage, there were indications that processing times were longer than expected and that the supporting infrastructure was not consistently reliable. Airports such as Lisbon experienced sufficient disruption to suspend use of the system temporarily, supported by additional police staffing to manage queues. That response alone should have been enough to signal that the system was not yet ready for universal application.What has happened since full implementation is predictable. Border processing now includes biometric capture for every eligible passenger. That adds time to each individual transaction. The European Commission has pointed to an average processing time of around 70 seconds per passenger. The figure is technically correct and operationally misleading. Airports do not function on averages. They function on peaks.When multiple long-haul aircraft arrive within a narrow window, several hundred passengers can reach immigration at the same time. A marginal increase in processing time per passenger quickly compounds into significant queues. Add even a small disruption, such as a non-functioning kiosk or a shortage of border officers, and the system slows further. Once a queue begins to build, it does not dissipate quickly. It feeds into itself.This dynamic is well understood within the industry. Airport infrastructure is built around waves of arrivals and departures, particularly at major hubs. Morning transatlantic arrivals, evening long-haul banks, and high-density short-haul peaks create predictable surges in passenger flow. Any system that adds friction at the border must be designed to handle those surges, not theoretical averages spread across a day.The EES system, in its current state, struggles to do that. Airlines and airport operators had raised concerns months before full rollout. Industry bodies including Airports Council International Europe, Airlines for Europe and the International Air Transport Association identified three core risks: Insufficient border staffing, unresolved technology issues, and the absence of a widely available pre-registration tool that would allow passengers to complete part of the process before arriving at the airport.Those concerns remain valid. Staffing levels at many border checkpoints are tight, even during normal operations. The addition of biometric processing increases the workload at each position. Technology reliability has improved compared with early trials, yet failures continue to occur, particularly at automated kiosks. The pre-registration application, designed to reduce pressure by shifting part of the process away from the airport, remains limited in its availability. As a result, the entire burden falls on the border itself.The implications are already visible. Passengers are missing flights because they cannot clear immigration in time, airlines are adjusting boarding processes to account for uncertainty at outbound passport control, and airports are managing queues that extend far beyond the physical space originally designed for border processing.The impact is not evenly distributed. Airports with a high proportion of non-EU arrivals are under greater pressure, particularly those handling long-haul traffic from North America, the Gulf and Asia. These passengers must all pass through EES processing, and they often arrive in concentrated waves. For those airports, the system introduces a new constraint on throughput at precisely the busiest points in the day.There is also a reputational dimension. Passengers do not distinguish between an airport operator, a national border authority or an EU-managed system. The experience is interpreted as a single journey. Long queues at immigration become an airport problem in the eyes of the traveller, regardless of where responsibility sits. That matters for hubs that have invested heavily in efficiency and service as part of their competitive positioning.The timing compounds the challenge. Europe is approaching the peak summer travel period, when passenger volumes increase significantly across all major hubs. July and August will bring sustained pressure rather than isolated peaks. The system has yet to demonstrate that it can operate smoothly under those conditions.At the same time, the wider aviation environment is already complex. Airlines are managing higher operating costs, network adjustments linked to geopolitical developments, and continued supply constraints on aircraft deliveries. Passenger demand remains strong, yet expectations around reliability and ease of travel have risen. Border friction sits directly within that expectation.None of this suggests that EES is an unnecessary policy. The objective of accurately tracking entries and exits, identifying overstays and strengthening external border security is legitimate. The system has already processed tens of millions of crossings and contributed to enforcement outcomes that were not previously possible at scale. The issue is not the concept. It is the timing and the readiness of the infrastructure supporting it.A more flexible approach to implementation would reflect operational reality. Allowing temporary suspensions or scaled-back processing during peak periods would provide immediate relief while technical and staffing issues are addressed. Accelerating the rollout of pre-registration tools would shift part of the process away from the border itself, reducing pressure where it is most acute. Investment in staffing and equipment reliability is equally essential.The author is an aviation analyst. X handle: @AlexInAir.