Taking a hard knock in the recession-hit US and other major markets, India's exports nose-dived by 22 per cent in January, dashing all hopes of a recovery riding on the December figures.

After the official figures for December showed exports declining by just about 1.1 per cent, commerce secretary G K Pillai came out with "unexpected" trends of overseas shipments taking a plunge in January in the face of a slump in demand for Indian goods in the global market. "It is little unexpected. There were not many orders in the last quarter," Pillai told PTI. The official figures for January will be released on March 1.

Pillai said India would at best achieve $170 billion exports in the current fiscal. The government had set a target of $200 billion on the back of $162 billion achieved in 2007-08. "Exports are going to come down and we have to live with it," he added.

The official figures released by the commerce ministry today showed exports of Indian goods dipped for the third consecutive month in December 2008 in the backdrop of the global economic crisis, which led to reduced orders from overseas clients.

Exports shrunk 1.1 per cent in December to $12.69 billion against the 21 per cent growth in the year-ago month.

The more than 50 per cent drop in crude oil prices also shaved off India's overall import bill in December 2008, which expanded by 9 per cent to $18.61 billion. This helped to narrow the trade deficit, which is the difference between exports and imports, to $7.6 billion against $10 billion in November 2008. Trade deficit for the April-December 2008 period stood at $93.81 billion, an increase of 59 per cent.

Narrowing of trade deficit is being cited as a reason for rupee appreciating by 3 per cent in December. Despite this, trade deficit is unlikely to turn positive because of robust non-oil import, which is seen as an indicator of economic health.

"The trade balance will remain in negative territory throughout 2009, as exports are set to deteriorate amid subdued global demand," Sherman Chan, an economist with Moody's Economy.com, wrote in a report.

In terms of quarterly dip, exports have dipped for the first time in seven years. In 2001, they declined for six months in a row (July to December). Cumulative merchandise exports in the third quarter of 2008 contracted 7.5 per cent against about 34 per cent growth in the same period of 2007. The third quarter historically accounts for about 24 per cent of the total export performance in a financial year.

Exports had shrunk 12.1 per cent and 10 per cent in October and November, respectively. "This trend is likely to continue until the consumption and employment numbers do not improve in the US. This higher rate of unemployment in developed nations squeezes the purchasing power in the hands of consumers," said Soumendra K Dash, chief economist, Care Ratings.

However, in rupee terms, exports during the month grew 22 per cent, due to the 23.88 per cent annual depreciation in the rupee against the dollar. A depreciating rupee adds to the rupee earnings of exporters.

Imports expanded at the slowest pace since September 2009, mainly due to fall in crude prices during December. Oil imports dipped by 31 per cent to $4.71 billion from $6.82 billion in the year-ago month. Lower oil imports, according to Dash, could be because of inventory pile-up in oil refineries, which were operating at more than 100 per cent of their capacity.

However, non-oil imports, comprising raw material and capital goods, increased 32 per cent to $15.5 billion from $11.78 billion in December 2008.