Current account surplus in FY21 after 17 years

New Delhi: 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, says the Economic Survey 2020-21 tabled by the Union Minister for Finance & Corporate Affairs, Nirmala Sitharaman in Parliament today.

The Economic Survey observes that India's decline in imports outweighed that in exports – leading to smaller trade deficit of $57.5 billion in April-December, 2020-21, compared to $125.9 billion in corresponding period last year. In April-December, 2020-21, merchandise exports contracted by (-) 15.7 per cent to $200.8 billion from $238.3 billion in April-December, 2019-20.

Imports. The total merchandise imports declined by (-) 29.1 per cent to $258.3 billion during April-December, 2020-21 from $364.2 billion during the same period last year. Trade balance with China and the US improved as imports contracted. Net services receipts amounting to $41.7 billion remained stable in April-September 2020 as compared with US$ 40.5 billion in corresponding period a year ago. It is expected that India will end with an annual current account surplus after a period of 17 years, notes the Economic Surevey, 2020-21.

The survey observes that the Balance on the capital account is buttressed by robust FDI and FPI inflows. These developments in current and capital account led to accretion of foreign exchange reserves that rose to an all-time high of $586.1 billion as on January 8, 2021. As at end-September 2020, India's external debt was placed at $556.2 billion, recording a decrease of $2.0 billion (0.4 per cent) over the level, as at end-March 2020, with marginal rise in its ratio to GDP to 21.6 per cent. RBI's interventions in forex market have been largely successful in controlling the volatility and one-sided appreciation of the rupee.