Exports fell 5.5% in June from a year ago to $25.1 billion, data released by the government showed, as demand slowed down in Europe and the US.
Imports dropped 13.5% to $35.3 billion, yielding a much lower trade deficit of $10.3 billion in June against $16.3 billion in May.
The government painted a grim picture of the future, but hoped the incentives announced in June will encourage exports.
The outlook for global demand for goods continues to be discouraging as major markets in Europe, the US, China and Japan are in the grip of uncertainty, commerce secretary S R Rao said on Friday announcing numbers.
""In the past two-three months there has been a tremendous dip in world trade. This will continue over the next one-two years" Rao said.
The commerce department has set a target of 20% rise in exports in this year over $300 billion achieved last year, a target that looks very difficult with first quarter exports down 1.7% from a year ago. Commerce department is incentivising its exporters to diversif into new markets such as South America and Africa, which, Rao said, has started bearing dividends.
It is also counting on some push from the softer rupee, which has depreciated over 20% against the dollar in the last 12 months, and incentives announced in June.
""Incentives have been given to all labour intensive sectors that have seen a downturn in exports. It will start showing results now,"" Rao said.
The decline in exports could further depress India's industrial sector, which posted modest gains in May, expanding 2.4% against a 0.9% contraction in April. Exporters say cheaper credit would help them retain their competitiveness in the global market.
"The cost of credit is still a cause of concern for the export sector and a general reduction in the interest rate would benefit manufacturing as well as exports,"" said Rafeeque Ahmed, president, Fieo .
Imports declined largely because of softer crude prices and moderation in gold purchases, as depreciated rupee made imports expensive.
Economists are hopeful of current account deficit dropping to about 3% of GDP from 4.2% in 2011-12 because of the ""As the lagged effect of rupee depreciation plays out, we expect the current account deficit to narrow further to around 3% of GDP in the current fiscal from a record high of 4.2% in fiscal 2011-12,"" said Sonal Varma of Nomura.
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2 Comments on this Story
alok3067 days ago
Thanks to softening of crude oil by 25% in May 12 our td in June 12 is down by handsome amount. Thank you crude, just chill. But I want trade deficit of 99 billion dollars or less this fiscal as against 180 plus in 11-12. Come on Indian replace the inland use of costliest imports by cheapest indigenous to make former available for value added re exports and to achieve trade surplus with trade hike and without rupee humiliation or exports subsidies.
null3067 days ago
Fiscal deficit for 2011-12 was $ 46.24 billion and not $122.74 billion!