India's exports dropped by 6.05 percent to $26.13 billion in August mainly on account of a significant dip in shipments from key sectors such as petroleum, engineering, leather, and gems & jewellery.
Imports too declined by 13.45 percent to $39.58 billion, narrowing trade deficit to $13.45 billion in August, according to the government data released on Friday.
The imports during the month slipped the most after August 2016, when it had contracted by 14 percent. The trade deficit stood at $17.92 billion in August 2018. Out of 30 key sectors, as many as 22 showed negative growth in August.
Shipments of gems and jewellery, engineering goods, and petroleum products contracted by 3.5 percent, 9.35 percent and 10.73 percent, respectively. The sectors which recorded positive growth in the last month include iron ore, electronic goods, spices, and marine products.
The country's outbound shipments have remained subdued so far this year. It will have implications on the overall economic growth, which has reported over six-year low growth of 5 percent in the first quarter of the current fiscal.
India's industrial production growth too slowed to 4.3 percent in July, dragged mainly by manufacturing sector's poor show, according to government data.
Commerce minister Piyush Goyal said India will have to achieve $1 trillion exports in the next five years, and for this, there is a need to increase domestic production and improve competitiveness.
In August, oil imports declined by 8.9 percent to $10.88 billion, and non-oil imports fell by 15 percent to $28.71 billion.
Cumulatively, during April-August 2019, exports were down 1.53 percent to $133.54 billion, while imports contracted by 5.68 percent to $206.39 billion.
Gold imports plunged 62.49 percent to $1.36 billion in the month.
Commenting on the figures, Ludhiana-based exporter S C Ralhan said this is the right time for the government to announce incentives.
"Merchandise export from India scheme (MEIS) should not be withdrawn. The government must start thinking that EPCG (export promotion for capital goods) policy should be simplified to promote manufacturing and import of machines under EPCG should not have any export obligation for manufacturer exporters," Ralhan said.
Council for Leather Exports (CLE) Chairman Panaruna Aqeel Ahmed said this could be temporary phenomena and the exports would start growing in the coming months. "We are eagerly waiting for an export package," Ahmed said.
Federation of Indian Export Organisations (FIEO) President Sharad Kumar Saraf said that such a contraction in exports is a reflection of uncertainties, sluggish global demand and rising tariff war.
"Domestic issues including access to credit, cost of credit especially for merchant exporters, interest equalization support to all agri-exports, and quick refund of GST should be seriously looked into," he said.