India's exports shrink for first time in 3 years

India's exports in October shrank an annual 12.1 percent, the first year on year decline in nearly three years, as slowing output at home and troubled economies in key overseas markets slashed demand.

Overseas sales in the month plunged to $12.82 billion from $14.59 billion in 2007, and analysts said tight credit conditions had added to the woes of exporters.

"Two things contributed to fall in exports -- one, the global slowdown, and second very tight credit conditions during the month," said D.K. Joshi, principal economist with domestic rating agency Crisil.

Economists predicted exports may fall short of 20 percent growth in the 2008/09 fiscal year, way below a target for the 12 months of 25 percent expansion.

Exports recorded their last contraction in November 2005, when they fell an annual 11.4 percent.

High borrowing costs and frozen credit as the global economic crisis spilled into Indian markets have slowed economic activity.

Growth in imports also eased sharply to 10.6 percent in October from a scorching 43.3 percent growth the month before as oil prices tumbled and industrial activity slowed.

Imports in October stood at $23.36 billion, helping the trade deficit narrow slightly to $10.54 billion in October compared with $10.63 billion in September, data showed on Monday.

Palaniappan Chidambaram, who on Sunday was shifted from the Finance Ministry to the internal security portfolio following the Mumbai attacks, said last week he was considering help for top export sectors, including textiles, vehicles and jewellery.

Exports during April to October were up 23.7 percent at $107.8 billion from a year earlier.

"The fall in export growth in October is an aberration which will correct in subsequent months. But we won't attain 20 percent plus growth for this fiscal year," added Crisil's Joshi.

Oil imports still rose 22 percent during the month from a year earlier to $7.96 billion despite a slump in crude prices from their July peaks.

For April-October, the trade deficit stood at $73 billion, much higher than $45.64 billion a year ago.