The government on Thursday said it was fully geared up to meet the fallout of the war United States President George W Bush unleashed to topple Saddam Hussein with dawn air strikes on Baghdad. The Iraqi leader responded defiantly, decrying the "criminal Bush" and firing missiles at Kuwait.

Announcing the start of a campaign to oust Saddam and disarm Iraq, Bush said "selected targets" were hit. But US officials said an all-out air and ground offensive might be days away.

Bush spoke to Prime Minister Atal Bihari Vajpayee and discussed the situation in Iraq within hours of launching strikes. Vajpayee explained the Indian position that the strikes lacked justification and impaired the authority of the United Nations. The prime minister has called an all-party meeting on Friday.

The petroleum ministry said it was forming a contingency plan to ensure a regular supply of petroleum products for the next two months. Petroleum Minister Ram Naik said consumers would be cushioned against an unusual spurt in oil prices.

Since September, the government has been chalking out "plans for increasing the stock of oil products, and we have enough of petrol, diesel, aviation turbine fuel, liquid petroleum gas and other products for the next 60 days," Naik said at a press conference on Thursday.

The government has a three-pronged strategy: shoring up stocks, ensuring continuous supplies at all points and seeing that retail prices are reasonable.

Petroleum Secretary B K Chaturvedi did not divulge the “reasonable price” but said his ministry was in touch with the finance ministry, and duties on crude and petroleum products might be reduced if global crude prices increased.

Industry associations like the Confederation of Indian Industry were confident that there would not be any adverse impact on the economy if the war did not drag on. They said there was no need to reduce the 6 per cent growth target.

However, the immediate impact of the war was felt on the external trade front. A vessel carrying 17,850 tonnes of wheat worth Rs 600 crore (Rs 6 billion) to Iraq was stranded off Dubai.

A spokesman from the ministry of external affairs said there was no plan yet to evacuate Indians from the region surrounding the Gulf. "Around 1,200 employees in West Asia have returned with their families on four special flights, which were operated by Indian Airlines and Air-India for commercial reasons. Schools in Kuwait have closed. The families are not evacuees, they have opted to come back," the spokesman said.

"Airspace is open, airports are functioning and seats are available. There is no cause for panic because there is no major dislocation (in the region)," he said.

The crisis management group, comprising bureaucrats from the ministries of labour, defence, external affairs and civil aviation, also met on Thursday to discuss the problems India could face if the war dragged on.