The revival in exports was also helped by timely initiatives taken by the government

India's external trade recovered strongly in 2021-22 after the pandemic-induced slump of the previous year, with strong capital flows into India, leading to a rapid accumulation of foreign exchange reserves, says the Economic Survey presented in Parliament on Monday by Finance Minister Nirmala Sitharaman.

The Survey says that the resilience of India’s external sector during the current year augurs well for growth revival in the economy.

The Survey, however, cautions that the downside risks of global liquidity tightening and continued volatility of global commodity prices, high freight costs, coupled with the fresh resurgence of Covid-19 with the new variants may pose a challenge for India during 2022-23.

It further states that owing to the recovery of global demand coupled with revival in domestic activity, India’s merchandise exports and imports rebounded strongly and surpassed pre-COVID levels during the current financial year.

The revival in exports was also helped primarily by timely initiatives taken by the government. The USA followed by the UAE and China remained the top export destinations in April-November, 2021, while China, the UAE and the USA were the largest import sources for India.

Despite weak tourism revenues, there was significant pickup in net services receipts during April-December, 2021 on account of robust software and business earnings, with both receipts and payments crossing the pre-pandemic levels.

The Survey notes that the first half of the calendar 2021 witnessed an acceleration in the global economic activity that lifted the merchandise trade above its pre-pandemic peaks.

It says that India’s merchandise exports have followed the global trend and during April – December 2021 the merchandise exports grew by 49.7%, compared to corresponding period of last year and 26.5% over 2019-20 (April-December).

The Survey mentions that India has already attained more than 75% of its ambitious export target of $ 400 billion set for 2021-22, and is well on the track to achieve the target.

"Sharp recovery in key markets, increased consumer spending, pent up savings and disposable income due to announcement of fiscal stimulus by major economies, and an aggressive export push by the government has bolstered exports in 2021-22," according to the survey.

On the issue of merchandise imports, the Survey revealed that India witnessed a revival in domestic demand resulting in strong import growth. Merchandise imports grew at the rate of 68.9% in April-December, 2021 over the corresponding period of last year and 21.9% over April-December 2019, crossing the pre-pandemic level.

According to the Economic Survey, India’s current account balance turned into a deficit of 0.2% of GDP in the first half of 2021-22, largely led by deficit in trade accounts. Net capital flows were higher at US$ 65.6 billion in H1: 2021-22, on account of continued inflow of foreign investment, revival in net external commercial borrowings (ECBs), higher banking capital and additional special drawing rights (SDR) allocation.

"India’s external debt rose to US$ 593.1 billion as at end September 2021, from US$ 556.8 billion a year earlier, reflecting additional SDR allocation by the IMF, coupled with higher commercial borrowings," revealed the survey.

Talking about the capital account, the Survey stated that the net foreign investment inflows moderated to US$ 25.4 billion in the first half of the current financial year, compared to corresponding year of FY 2021.

As per data available till November 2021, the net FDI and gross FDI inflows have moderated largely due to lower equity investment. The Survey states that Foreign Portfolio investment remains volatile due to global uncertainties.