Severe sluggishness in demand in Europe hit India's merchandise exports, which fell for the third consecutive month this financial year. Compared with $26.3 billion in the corresponding period last year, exports fell 14.8 per cent to $22.4 billion in July. This was the steepest fall in 35 months (exports had declined 23.59 per cent in August 2009).
Imports, too, contracted for the third consecutive month, falling 7.78 per cent to $37.9 billion, against $41.1 billion in July last year. Crude oil imports fell 5.52 per cent to $12.22 billion, while non-oil imports declined 8.57 per cent to $25.70 billion, indicating a sluggish industrial scenario in the domestic economy.
"Contraction in this segment (imports) points to a slowdown in industrial activity, as it indicates a fall in consumption expenditure, as well as imports that are export-linked," said D K Joshi, chief economist, CRISIL.
As the fall in exports was more than that in imports, the trade deficit widened to $15.5 billion in July, against $11.08
billion in the corresponding month last year, prompting Moody's Analytics senior economist Glenn Levine to term it a "monster trade deficit".
For the April-July period, exports declined 5.05 per cent to $97.6 billion, compared with $102.8 billion in the corresponding period last year, while cumulative imports fell 6.47 per cent to $153.2 billion, compared with $163.8 billion in the year-ago period. The trade deficit for the April-July period stood at $55.5 billion, against $60.9 in the year-ago period.
Last month, Commerce Secretary S R Rao had said the crisis in Europe was affecting India's external trade, and the current global outlook was contributing to woes.
Joshi said it would be difficult to meet the Commerce Department's target of $360 billion of exports this financial year. Rao, too, had said meeting the target would be difficult, though not impossible.