Amid India's exports contracting for 10 months in a row, Moody's today said the decline is yet to bottom out and instead may get further impacted by drought.
"India's foreign trade is yet to bottom as the decline in exports and imports deepened again in July," Moody's research arm said adding, "the biggest current threat to India's trade outlook is the drought."
Out of 625 districts in the country 278 have been declared drought hit.
Exports declined by 28.4 per cent in July while imports tumbled by 37.1 per cent. The decline in exports in June was 27.7 per cent and 29.3 per cent in imports.
After growing over 30 per cent in the first half of 2008-09, exports took a downward slide in October 2008 and are contracting ever since.
Moody's said the decline in agricultural output reduces the volume available for export purposes and may even increase India's import needs.
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It further said if importing food becomes priority, policymakers may have no choice but to cut back on other areas such as resources used in infrastructure development.
However, it also said as a number of Asia-Pacific and European economies have come out of recession, and the US economy is likely to follow suit in the September quarter, export orders may regain momentum.
But the actual outbound shipments may not show a noticeable rebound until early 2010, it added.