India’s external sector remained resilient in 2016-17 amidst considerable fl ux in the international environment; the Box in sub-section 6 on the external vulnerability watch argues the case analytically. Shrugging off a two-year contraction, merchandise exports turned around in the face of muted global demand. Drivers of this rebound are profi led in the immediately following sub-section. This development also assumes signifi cance in view of the decline in net invisible receipts addressed in sub-section 3. Merchandise imports remained sluggish, although a signifi cant pick-up occurred in H2. Consequently, rising international commodity prices and the erosion in terms of trade gains notwithstanding, India’s merchandise trade defi cit narrowed further in 2016-17 and helped compress the current account defi cit (CAD)