Economic Survey sees strong external sector despite global headwinds

New Delhi : India’s external sector remained strong amidst ongoing geopolitical headwinds as the country’s forex reserves at the end of March 2024 were sufficient to cover more than 10 months of its projected imports for FY25 and 98 per cent of its external debt, according to the Economic Survey released on Monday.

It also points out that India’s rank in the World Bank’s Logistics Performance Index improved by six places, from 44th in 2018 to 38th in 2023, out of 139 countries.

The country is also adding more export destinations, signalling regional diversification of exports. The moderation in merchandise imports and rising services exports have improved India’s current account deficit which narrowed 0.7 per cent in FY24, the Survey states.

India’s services exports grew by 4.9 per cent to USD 341.1 billion in FY24, with growth largely driven by IT/software services and ‘other’ business services.

India is the top remittance recipient country globally reaching a milestone of USD 120 billion in 2023.

The country also witnessed positive net foreign portfolio investment inflows in FY24 supported by strong economic growth, a stable business environment, and increased investor confidence.

India’s external debt has also been sustainable over the years, with the external debt-to-GDP ratio standing at 18.7 per cent at the end of March 2024.

However, the Survey also states that challenges such as slowing global GDP growth (i.e., fall in global demand) and an all-time rise in trade protectionism (i.e., weakening globalisation) can pose a significant downside risk. In this context, both the government and the private sector must focus on removing barriers and implementing steps to boost India’s export competitiveness, it adds.