Page 463 - ES 2020-21_Volume-1-2 [28-01-21]

03

External Sector CHAPTER

oukfu ngrks oÉs% l[kk Hkofr ek#r%A
l ,o nhiuk'kk; o`Q'ks dL;fLr lkSâne~AA
The air that blows off a small lamp becomes the friend of a jungle fire!
Power garners support!

– Subhashita

COVID-19 pandemic has triggered the worst global recession in 2020 since the Great
Depression; the adverse economic impact is, however, expected to be lesser than
initially feared. The resulting economic crisis has led to a sharp decline in global
trade, lower commodity prices and tighter external financing conditions with varying
implications for current account balances and currencies of different countries.
Global merchandise trade is expected to contract by 9.2 per cent in 2020. Trade
balance with China and the US improved as imports contracted. The changing nature
of India’s global trade manifested in terms of sliding exports of gems and jewellery,
engineering goods, textile and allied products and improving exports of drugs and
pharma, software and agriculture and allied products. Pharma exports, in particular,
used this opportunity to enhance their share in total India’s exports and indicate
India’s potential to be the pharmacy of the world. Supported by resilient software
service exports, India is expected to witness a current account surplus during the
current financial year after a gap of 17 years. Balance on the capital account, on the
other hand, is buttressed by robust FDI and FPI inflows. These developments have led
to accretion of foreign exchange reserves that rose to an all-time high of US$ 586.1
billion as on January 8, 2021. RBI’s interventions in forex market have been largely
successful in controlling the volatility and one-sided appreciation of the rupee. High
levels of headline inflation, however, posits the classical trilemma before RBI to
maintain a fine balance between tightening of monetary policy to control inflation
on the one hand and stimulate growth on the other hand. Against the aforesaid
backdrop, various initiatives undertaken to promote exports, including Production
Linked Incentive (PLI) Scheme, Remission of Duties and Taxes on Exported Products
(RoDTEP), emphasis on improvement of trade logistics infrastructure and use of
digital initiatives would go a long way in enabling ‘ease of doing exports’.