Imports dropped by a sharper pace of 7.36 per cent to USD 41.9 billion, signalling weakening of the economy especially with regard to fresh investments as inward shipments of plant and machinery fell by eight per cent, according to provisional data released today.
The trade deficit also narrowed to USD 16.3 billion during May, from USD 18.5 billion a year ago.
"We have also seen the IIP (index of industrial production) numbers. So you can correlate the reasons why exports have not done too well...," Commerce Secretary S R Rao said.
In the backdrop of an ambitious 20 per cent growth target in exports for the current fiscal, announced in the recently released Foreign Trade Policy, the Commerce Ministry is "recalibrating its strategy" to find out a solution, he said.
Dismal export performance comes on the heels of disappointing industrial output that showed a mere 0.1 per cent expansion in April.
Contraction of demand in India's traditional markets, particularly in Euro zone economies is hurting exports, Rao said, adding that "(We are) still not out of the woods... bailing out of Greece and Spain is still work in progress".
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Decline in exports in May were particularly witnessed in top exporting commodities like petroleum products (-26.07%), engineering goods (-15.67%), gems and jewellery (-9%) and readymade garments (-15.82%).
On the import front, gold and silver was down by about 51 per cent, while plant and machinery dropped 8 per cent. However, imports of crude oil were up 14 per cent.