Expecting the US economy to bottom out in October, and that leading to a global recovery next year, Moody's Economy.com said, "Although India's exports may stabilise in the next few months, a solid recovery is not expected until well into 2010."
According to official data released on Wednesday, the country's outbound shipments fell by 29.2 per cent in May to $11.01 billion from $15.55 billion in the same month last year.
The total imports, largely influenced by a decline of 60.6 per cent in oil imports, showed a faster pace of contraction than exports. The trade deficit more than halved to $5.20 billion in May 2009-10 from $11.13 billion year-on-year.
"The heavy dependence on oil from overseas is a huge downside risk to India's trade outlook. As domestic demand remains more solid than external demand, a pick-up in oil prices, while exports stay sluggish, could again put downward pressure on the emerging giant's trade performance," it said.
Weak external orders also carry negative implications for industrial production. Indian manufacturers may have to focus even more on the domestic market until export prospects brighten up, it said.