India’s trade deficit narrowed in February to its lowest since September 2013 as exports contracted at a slower pace, with demand remaining weak from Europe, the country’s biggest market.
India has been struggling with weak global demand although the blow has been softened by a collapse in its oil import bill and curbs on gold imports.
Cheaper Chinese exports have undercut India’s engineering exports, which constitute around a quarter of total goods exports.
Prime Minister Narendra Modi’s decision to impose curbs and raise tax on steel imports to protect domestic steel makers has also had the adverse impact of raising costs and sapping the ability of Indian producers of engineering goods to compete.
Merchandise exports, equivalent to about 15% of India’s $2tn economy, contracted for the 15th straight month in February. They fell 5.66% from a year earlier to $20.74bn, data released by ministry of commerce and industry yesterday showed.
February imports, fell 5.03% from a year earlier to $27.28bn, compared with $28.71bn in the previous month.  The trade deficit for February narrowed to $6.54bn, mainly due to soft demand for crude oil and falling commodity prices, compared with $7.64bn a month ago.
Reserve Bank of India governor Raghuram Rajan has rejected calls to devalue the currency, saying last week that the central bank would not target the rupee’s exchange rate and would only intervene to curb volatility.
Exporters said the outlook remained bleak, mainly due to the global slowdown, and annual exports could fall to near $260bn in the current fiscal year, compared with $310bn in the previous year.
“We will be lucky if my exports could touch even Rs80mn compared with Rs120mn last year,” said Arun Kumar Garodia, an engineering-goods exporter from Kolkata.
He said a rising import price for steel had hit his margins, forcing him to fire one-third of labour force.  India’s economy is estimated to grow at 7.6% in the current fiscal year ending March.