Page 466 - ES 2020-21_Volume-1-2 [28-01-21]

External Sector 93

the pace of the recovery, which is expected to be uneven across sectors and countries.
3.7 In sum, the global economy is still reeling under the impact of the unprecedented COVID-19
shock. Amidst this uncertain and shaky global economic environment, India’s external sector has
emerged as a key cushion for resilience. The comfortable external balance position of India has
been supported by surplus current account balances over three consecutive quarters, resumption
of portfolio capital inflows, robust FDI inflows and sustained build-up of foreign exchange
reserves.

DEVELOPMENTS IN INDIA’S BALANCE OF PAYMENTS (BOP)

Merchandise Trade

3.8 During Q1: FY 2020-21, India’s exports and imports saw a sharp contraction in line with
the contraction in global trade. The decline in imports outweighed that in exports – leading
to smaller trade deficit of US$ 9.8 billion as compared to US$ 49.2 billion in Q1 last year.
India registered a trade surplus in the month of June, 2020 after a gap of 18 years. With the
unlocking of the economy from June onwards, a gradual revival in India’s merchandise trade
got underway (Figure 3). The trade deficit during the April-December, 2020-21 was US$ 57.5
billion as compared to US$ 125.9 billion in the corresponding period last year.

Figure 3: Merchandise Trade Balance, Exports and Imports

30 Trade Balance Exports (RHS) Imports (RHS) 30

20 20
10 10

0 -5.0 0
US$ Billion -10 -9.8 -8.3 -10 Growth rate (Y-o-Y), Per cent

-20
-20
-30 -30
-31.2
-40 Lo -40
Lockdown effectckdown effectckdown effect
Lo
-50 -50
-49.2
-60 -60
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2018-19 2019-20 2020-21
Source: Department of Commerce (DoC)

3.9 The details of the major commodities in which India had favourable and
unfavourable trade balance during 2020-21 (April-November) as compared to 2019-20
(April-November) are at Table 1 and Table 2 respectively.