before concluding, it is only fair to say a few words about the exchange rate of the rupee. over the last couple of years, the exchange rate has seen large two - way movements with considerable volatility imparted mainly by global spillovers. during 2019 – 20 so far, the rupee has 3 / 4 bis central bankers'speeches traded in a narrow range, with modest appreciation in q1 giving way to some depreciation in august and the first half of september, accentuated by drone attacks on saudi oil facilities on september 14, 2019. in its external sector report of july 2019, the international monetary fund ( imf ) has employed a suite of models to assess the alignment of currencies with their fundamentals. for the rupee, the imf estimates the reer gap to be zero, implying that the currency is fairly valued and broadly in line with fundamentals. india ’ s exchange rate regime is flexible and market - driven, with the exchange rate being determined by the forces of demand and supply. the rbi has no target or band for the level of the exchange rate. interventions are intended to manage undue volatility. this is reflected in the two - sided interventions conducted during the past two years – net purchases in 2017 – 18, followed by net sales in 2018 – 19. in fact, it is in recognition of this flexibility that the us department of the treasury has removed india from its watch list relating to currency manipulation. conclusion 15. overall, the outlook for india ’ s external sector is one of cautious optimism, albeit with some downside risks accentuated at this juncture. among them, deepening of the global slowdown and escalation of trade and geopolitical tensions appear to be the most significant. volatile international crude prices also continue to pose potential risks to the viability of the current account balance through trade and remittances channels. yet, there are underlying strengths that can be built upon to buffer the external sector from these risks. the search for new export markets and new niches must go on so as to reap the benefits of changing dynamics of global value chains. indian it companies need to accelerate market diversification and invest in new skills and technologies to hone their comparative advantage. remittances and non - resident deposits are likely to remain shock - absorbers over the medium term and need to be assiduously cultivated, including by ease of remitting / depositing and reducing transaction costs.

, has increased three - fold from 15 per cent in the first half of the 1990s to 45 per cent during 2014 – 19. 6. notwithstanding these achievements, there are several areas of concern as well which occupy centre - stage in the conduct of external sector management. first, merchandise exports have lost momentum under the weight of the slump in world trade. in spite of export volume growth averaging 4. 2 per cent during 2013 – 18 ( unctad, 2019 ), india ’ s export growth in us dollar terms has weakened – as in a host of emerging and advanced economies – to 2. 2 per cent over the same period, as falling unit value realisations have taken their toll. the slowdown in global demand has affected our exports of petroleum products as well – they constitute 14 per cent of total merchandise exports. second, the deceleration in domestic demand has pulled imports, especially non - oil non - gold imports, into contraction and this has reduced the inflow of intermediates, capital goods and technology that is vital for modernising our infrastructure and industry. third, portfolio flows, which on average account for about 23 per cent of external financing in a normal year, have turned highly volatile, with net outflows of us $ 0. 6 billion in 2018 – 19. during 2019 – 20 so far ( up to september 13 ), portfolio equity outflows were of the order of us $ 1. 4 billion but lower than us $ 2. 9 billion in the corresponding period a year ago. net inflows into the debt market of us $ 4. 1 billion have, however, provided relief. moreover, these portfolio capital movements have turned out to be conduits of global spillovers, impacting domestic equity, debt and forex markets, and asset prices. nonetheless, the underlying resilience of india ’ s external sector, anchored by the positive features i set out earlier, have cushioned these shocks and insulated the domestic economy. managing the external sector 7. against this backdrop, i would like to turn to several recent initiatives undertaken by the reserve bank of india and the government of india to fortify india ’ s external position and improve the capacity of the economy to deal with the headwinds that confront us in these testing times. exports 8. exports hold the key to a sustainable balance of payments position. in the final analysis, liabilities in the form of debt and even equities cannot entirely substitute for foreign exchange earnings from exports of