India's merchandise exports fell to a 12-month low of $19.9 billion in October. As a result, the trade deficit rose to a four-year-high of $19.6 billion in the month.

The export slowdown is mainly due to a demand contraction in traditional markets such as the US and Europe. Electronics shipments to European Union contracted by 18 per cent in October. Most other export sectors too slowed in October including: engineering (averaging about $7.73 billion in the first six months of this fiscal) growing just 2.6 per cent to $4.4 billion and petroleum products growing only at 9.4 per cent to $3.8 billion.

Releasing the provisional data on Tuesday, the Commerce Secretary, Dr Rahul Khullar, said the trade deficit “is something to be worried about because at this rate we are going to breach the $150-billion mark for 2011-12.”


If the trade deficit widens to $155 billion, the current account deficit may cross 3 per cent of GDP. However, Dr Khullar said trade deficit may have peaked and would fall from November as the imports would “start seeing perceptible signs of deceleration.”

Noting an export slowdown across the sectors, he said, “The picture is not going to be rosy for the next six months.” He said it was still possible for exports to reach the target of $300 billion for the fiscal, though it will be “difficult”.

Export growth of 10.8 per cent year-on-year in October was the slowest pace in the last two years. Export growth was 82 per cent in July, then fell to 44.25 per cent in August and further down to 36.36 per cent in September.


Imports in October soared 21.7 per cent to reach a three-month high of $39.5 billion. The faster import growth was mainly on account of higher prices of crude oil and vegetable oil, and an increase in imports of coal as well as gold and silver.

Exports during April-October 2011 surged 46 per cent to $179.8 billion, while imports during the period rose 31 per cent to $273.5 billion. This led to a trade deficit of $93.7 billion.

“The crisis in the Euro Zone will spread soon making exports more difficult,” Mr Ramu S. Deora, President, Federation of Indian Export Organisations, said.

Coal imports, mainly meant for power plants, more than doubled to $1.4 billion in October. Gold and silver imports have grown as people see it as safe assets to invest in, while fertiliser imports have also increased ahead of rabi season. Gold and silver imports in October grew by 40 per cent to $7.2 billion in October.