India's exports declined by a third in March to $11.5 billion, its sixth straight fall, and analysts said the global economic slump would further hurt overseas sales by Indian firms in the months ahead.
Imports fell by 34 percent to $15.56 billion in March from a year earlier due to a slowdown in Asia's third largest economy and moderate global crude prices , narrowing the trade deficit to $4 billion in March from $6.32 billion a year ago.
"The impact of global economic crisis on India is going to be higher in 2009/10 compared to (the) previous year," said N.R. Bhanumurthy, an economist at the Institute of Economic Growth.
"After achieving a robust growth for four consecutive years, India's export growth started showing negative trend since October 2008 and is expected to continue for the rest of the year due to recessionary situation in most industrialised nations," he said.
India's exports stood at $168.7 billion in the fiscal year to March, up a paltry 3.4 percent from 2007/08, while imports grew 14.3 percent to $287.8 billion in 2008/09, official data showed on Friday.
Exports, which account for nearly 16 percent of India's gross domestic product, were a notch below a downwardly revised 2008/09 fiscal year target of $170 billion.
The trade deficit widened 34 percent to $119 billion in 2008/09, from $88.5 billion in the previous year.
Last month, the International Monetary Fund slashed global growth forecasts and said emerging markets were dealing with a sharp drop in capital flows and a collapse in global trade.
While growth is expected to pick up in emerging nations, including China and India, a recovery to previous healthy levels will depend on a pick-up in advanced economies, the IMF said.
The United States and Europe, which consume about 35 percent of India's exports, are yet to show signs of recovery and this has dampened prospects for an early recovery in factory output and exports from jewellery to textiles.
NO IMMEDIATE REBOUND SEEN
Since October, India's central bank has cut its key lending rate by 425 basis points while the government has increased incentives for exporters to make their products competitive.
But government officials and economists say these steps would not help in an immediate rebound in exports.
"I don't think exports are going to pick up unless advanced global economies recover. Imports are also going to take a hit. A recovery can be expected not before the second half of 2009/10," said D.K. Joshi, principal economist at ratings agency Crisil.
Last month, Trade Secretary G.K. Pillai said exports were likely to extend their decline until September, and then stage a mild recovery.
Non-oil imports, a key measure of domestic economic activity, fell 18.9 percent in March from the year ago period, signalling that factory output was still sluggish.
IEG's Bhanumurthy said the swine flu outbreak that started in North America was expected to dampen global business through decline in movement of goods and labour.
"For India, this could affect both services and tourism sectors, and hence could delay the upturn in the growth of industrial output."