Page 403 - ES 2020-21_Volume-1-2 [28-01-21]

30 Economic Survey 2020-21 Volume 2

Figure 31: Gross Market Borrowings by States Figure 32: India 10-Year Benchmark
and Centre G-sec Yield

9

8

Per cent 7

6

5
2010-11 17-Apr-19 12-May-19 06-Jun-19 01-Jul-19 26-Jul-19 20-Aug-19 14-Sep-19 09-Oct-19 03-Nov-19 28-Nov-19 23-Dec-19 28-Jan-20 03-Mar-20 07-Apr-20 12-May-20 16-Jun-20 21-Jul-20 25-Aug-20 29-Sep-20 03-Nov-20 08-Dec-20

Source: RBI
1.35 Government and RBI led liquidity support measures, increase in limits of ways and
means advances, and relaxation of rules governing withdrawals from the Consolidated
Sinking Fund (CSF) enabled bond markets to absorb pressures of increased government
borrowings and added to their buoyancy. The surplus systemic liquidity continues to
ensure softening of 10-year G-sec yield and reduction of spread with AAA corporate
bond yields (Figure 32). The average spread of AAA rated 3-year corporate bond fell
from 171 bps in May 2020 to 22 bps in December 2020. The spreads on AA rated
corporate bonds also moderated significantly during the same period i.e., by 131 bps
(from 243 bps to 113 bps) and 60 bps (from 177 bps to 117 bps) each for 3-year and 5-
year bonds respectively.

1.36 The external sector provided an effective cushion to India during these uncertain

times. Amid domestic and global demand and supply disruptions, India’s merchandise
exports fell by 21.1 per cent in the first half of 2020-21 with the contraction being more
severe for imports at 38.8 per cent. Exports, however, revived gradually as the rate of
contraction eased to 5.0 per cent in Q3:2020-21, with non-oil exports increasing by 2.3 per
cent during the quarter. With the gradual unlocking of the economy, the decline in imports
has also moderated to 8.3 per cent during Q3: 2020-21. While trade deficit narrowed to
US$ 26.2 billion in April-September 2020-21 from US$ 88.9 billion a year ago, it stood
at US$ 31.2 billion during the third quarter of the year, lower than US$ 37.0 billion in the
same quarter last year. India recorded a current account surplus of 3.1 per cent of GDP in

the first half of the year largely supported by strong services exports (Figure 33). While
prospects of external demand normalization are underway, its pace is contingent on the
global COVID-19 outlook and successful rollout of vaccinations across the world.