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External Sector 121

current year. Improving trends in India’s merchandise trade have been supplemented by equity
capital inflows, robust FDI inflows and sustained build-up of foreign exchange reserves. The
comfortable foreign exchange reserves give the much-needed space for enhanced domestic
investments. The disruption of global manufacturing value chains due to the COVID-19
pandemic presents a tremendous opportunity for India to become one of the key nodes in the
chain. Various export initiatives, as documented above – including those aimed at promoting
ease of exporting – have been undertaken by the government and RBI and implementation
of these initiatives would pave the way for the sustainable export performance in India going
forward.

CHAPTER AT A GLANCE

COVID-19 pandemic 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.

 Trade balance with China and the US improved as imports slowed.

While exports of gems and jewellery, engineering goods, textile and allied products slide,
 exports of drugs and pharma, software and agriculture and allied products improved.
Pharma exports, in particular, hold the potential to be the pharmacy of the world.

Overall, India is expected to witness current account surplus during the current financial

year after a gap of 17 years

The foreign exchange reserves rose to an all-time high of US$ 586.1 billion as on January

8, 2021.

 Balance on the capital account, was buttressed by robust FDI and FPI inflows,

RBI’s interventions in the forex markets ensured financial stability and orderly conditions

 and have been largely successful in controlling the volatility and one-sided appreciation
of the rupee.

Various initiatives undertaken to promote exports, including Production Linked Incentive
(PLI) Scheme, Remission of Duties and Taxes on Exported Products (RoDTEP),

improvement in logistics infrastructure and digital initiatives would go a long way in
strengthening external sector in general and exports in particular.