Page 405 - ES 2020-21_Volume-1-2 [28-01-21]

32 Economic Survey 2020-21 Volume 2

1.38 Robust capital inflows along with a weak dollar lent an appreciating bias to the Indian
rupee since end June 2020. However, RBI’s prudent interventions in the foreign exchange
market limited the appreciation (Figure 35). Combined with a rise in gold reserves and foreign
currency assets, India’s foreign exchange reserves climbed to a new high of US$ 586.08 billion
as on 8 January, 2020, covering more than 18 months of imports. External debt as a ratio to
th
GDP, which is comprised primarily of private sector's external debt, rose marginally to 21.6 per
cent as at end-September 2020 from 20.6 per cent at end-March 2020. However, the ratio of
foreign exchange reserves to total and short-term debt (original and residual) improved because
of the sizable accretion in reserves (Figure 36). Reflecting lower current receipts, debt service
ratio (principal repayment plus interest payment), however, increased to 9.7 per cent as at end-
September 2020 as compared to 6.5 per cent at end-March 2020.

Figure 35: Movements in Rupee Figure 36: External Debt Comfortable

100 0.72 35 12
95 0.7 30 10

90 25
0.68 8
85 20 6
INR 80 0.66 INR Per cent 15 Per cent
0.64 10 4
75
5 2
70 0.62
0 0
65 0.6 2013 2018 2019 2020
Jan/20 Feb/20 Mar/20 Apr/20 May/20 Jun/20 Jul/20 Aug/20 Sep/20 Oct/20 Nov/20 Debt Service Ratio 2020 (Sept-end)

INR/USD INR/GBP External Debt to GDP
INR/EUR INR/YEN (RHS) Ratio of Short-term debt to reserves
Source: RBI
1.39 Overall, India is well on its path to a V-shaped recovery to pre-pandemic levels and beyond.
The economy was well supported by strategically paced macro-economic policies and resilient
fundamentals. The coordinated policy response on both health and economic fronts helped India
to endure the pandemic-induced shocks this year.

BOX 3: COVID-19’s Impact on GVA, Labour Markets and Fiscal
Position: A Geographical Perspective

The geographical spread of the COVID-19 health shock is intertwined with the pre-existing
economic fragilities of the states. This fragility can be interpreted on three fronts– relative
sectoral shares in GVA, labour market and fiscal position. The highest output contributing
state and the COVID-19 epicentre of the country i.e., Maharashtra has grappled with contact-
sensitive services sector shock (with 56 per cent of its output coming from that sector) and
labour market stresses given its higher percentage share of MSMEs. While Tamil Nadu and
Kerala are most fragile to the construction sector shock, a manufacturing slowdown lends
risks to Gujarat’s and Jammu and Kashmir’s economic recovery. Punjab, though sheltered by
the relatively resilient agricultural sector, is expected to experience informal labour shocks
in the services sector. Services led informal sector shocks also make states like Delhi and