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External Sector 107

3.50 In terms of 6-currency nominal effective exchange rate (NEER) (trade-weighted), the rupee NET INTERNATIONAL INVESTMENT POSITION
depreciated by 2.1 per cent in December 2021 over March 2021, while it appreciated by 0.9 per
cent in terms of real effective exchange rate (i.e. REER) terms (Figure 19a). Similarly, the rupee 3.51 One way to gauge country’s resilience is to look at its net international investment position.
depreciated by 1.6 per cent in terms of 40-currency NEER (trade-weighted) in December 2021 Net International Investment Position (IIP) is the difference between the value of financial assets
over March 2021, while it appreciated by 0.4 per cent in terms of 40-currency REER, reflecting of residents of an economy that are claims on non-residents and the liabilities of residents of an
widening inflation differential with trading partners (Figure 19b). economy to non-residents at a point in time. It represents either a net claim on or a net liability
to the rest of the world.

Figure 18: Movement of exchange rate against US dollar of 3.52 India’s net IIP stood at (-) 11.3 per cent of GDP (US$ -332 billion) as at end-September
major EME* currencies (Nov 2021 over Nov 2020) 2021 – a sustained improvement since end-March 2019 – led by a higher asset-liability ratio,
which improved to 73.6 per cent as at end-September 2021 from end-March 2021 (Figure 20).
Turkey -34.4 The improvement in asset- liability ratio is due to significant build-up of reserve assets (US$
Argentina -25.5 58.4 billion between Q4: FY21 and Q2: FY22), which more than compensated for build-up in
Sri Lanka -8.9 Appreciation liabilities on account of FDI, FPI and other investments.
Thailand -8.7
Poland -7.2 Figure 20: Net International Investment Position (IIP)
Chile -6.5 a. Declining Net IIP and ratio to GDP b. Due to higher Asset Liabilities Ratio
Philippines -4.3
Brazil -2.3 0 Net IIP Net IIP to GDP- RHS 0 75 71.0 73.6
Mexico -2.2 70
Malaysia -1.6 -100 -4 65.6
Indonesia -0.5 -200 -8 Per cent 65 62.3 60.6 60.2
India -0.3 US$ Billion -300 -11.3 Per cent of GDP 60 58.7
-12
South Africa Depreciation 0.2 -265 -332 -16 55 57.8 58.9 59.5 59.5
China D 3.2 -400 -15.3
Russia 5.3 -500 -20 50
-40 -30 -20 -10 0 10 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Percentage Change end-March end-Sept. end-March end-Sept.
Source: Bank for International Settlements (BIS) 2021P 2021P
Note: *: EME: Emerging market economies Source: RBI
Note: P: Provisional
Figure 19: Index of 6-Currency and 40-Currency NEER and REER EXTERNAL DEBT
(Trade Based Weight) (Base Year: 2015-16 =100)
3.53 India’s external debt as at end-September 2021, estimated at US$ 593.1 billion, grew
a. 6-Currency b. 40-Currency by US$ 22.3 billion (3.9 per cent) over the level as at end-June 2021. Excluding the valuation
NEER REER (RHS) NEER REER (RHS) gains due to the appreciation of the US dollar, the increase in external debt would have been
96 106 98 108 US$ 23.7 billion, instead of US$ 22.3 billion. Commercial borrowings, the largest component

92 104 96 106 of external debt, at US$ 218.8 billion, recorded a quarter-over-quarter (q-o-q) positive growth
104
Index 88 102 Index 94 102 of 2.5 percent over the level a quarter ago. The NRI deposits, the second largest component, at
US$ 141.6 billion were at the same level as at end of the previous quarter. The short-term trade
100
84 92 100
98 98 credit, the third largest component, at US$ 97.4 billion continued to contract. Together, these
80 96 90 96 three components constitute 77.2 percent of total external debt as at end-September, 2021. IMF
Jan 2020 Mar 2020 May 2020 Jul 2020 Sep 2020 Nov 2020 Jan 2021 Mar 2021 May 2021 Jul 2021 Sep 2021 Nov 2021 Jan 2020 Mar 2020 May 2020 Jul 2020 Sep 2020 Nov 2020 Jan 2021 Mar 2021 May 2021 Jul 2021 Sep 2021 Nov 2021 (SDRs) at US$ 23.3 billion rose by as much as US$ 17.6 billion (310.8 per cent) over the level
as at end-June 2021, primarily reflecting additional SDR allocation on August 23, 2021.
Source: RBI 3.54 India’s external debt, which crossed the pre-crisis level as at end-March 2021, consolidated

further as at end-September 2021, aided by revival in NRI deposits and the afore-mentioned