NEW DELHI India's exports fell nearly 5.5 percent in June due to weak demand from Europe and the United States, a trade ministry official said, adding pressure on Asia's third-largest economy.
Imports also fell sharply, however, thanks in part to lower global oil prices, and narrowing the trade deficit to $10.3 billion compared to the previous month, something of a silver lining that may help assuage concerns about India's balance of payments.
Exports were down 5.45 percent to $25.1 billion in June from a year earlier, while imports fell 13.46 percent, Anup Pujari, director general of foreign trade told reporters on Friday, citing provisional data. The final numbers will be published next month.
"World over, there has been a tremendous dip in the world trade," Trade Secretary S. R. Rao said at the same event. He warned that the debt crisis in Europe, which accounts for a third of India's trade, showed no sign of a resolution.
"In the euro zone, we don't see any finality. Apart from distress in Greece, now we find that both in Spain and Italy also their borrowings are more than their actual GDP."
"The sad news is that the U.S. market is also contracting," he said, forecasting up to two years of depressed trade.
Exports account for more than a fifth of India's GDP.
Other Asian exporters also reported gloomy news on Friday as global demand sputters, with China's second-quarter growth slowing to a three-year low and South Korea's central bank cutting its GDO growth forecasts for the year. Singapore reported a surprise contraction.
CURRENT ACCOUNT DEFICIT
India's current account deficit touched a record high in the March quarter, keeping the balance of payments in deficit for the second quarter in a row.
The widening current account deficit has weighed on the rupee, pulling the currency to a record low of 57.32 to the dollar on June 22.
India's economic growth has slowed to its worst pace in nine years and inflation is stubbornly high. Economists say an uptick in industrial output is too small to signal a recovery.
After recording strong growth for much of last year, India's overseas sales tanked in March and have risen only one month since. Exports between April and June fell 1.7 percent, totalling $75.2 billion.
Exports in sectors where India had shown strong growth last year, engineering goods and petroleum products, fell in June.
The Asian Development Bank on Thursday cut its 2012 growth forecast for India to 6.5 percent from a forecast of 7.0 percent made in April.
(Reporting by Matthias Williams and Arup Roychoudhury; Editing by Frank Jack Daniel)