India’s exports of goods shrank by nearly a quarter in September from a year ago. Imports fell 25.42 per cent in September from a year earlier. Consumer and industrial demand for imports has weakened. India’s economy, Asia’s third largest, is mostly driven by domestic demand.

However the trade deficit narrowed to $10.48 billion in September from $12.5 billion in August as gold and oil imports declined. The Trans Pacific Partnership may further hurt prospects for India’s exports, particularly of textile and leather products.

The country’s exports to Europe fell 10.9 per cent in the first five months of the current fiscal year. Exports to the United States fell 3.8 per cent, mainly because of a decline in the value of oil products and textile exports. India has cut interest rates by 125 basis points so far this year and boosted spending on public works. Economic growth still slowed to seven per cent in the April-June quarter from 7.5 per cent the previous quarter.

The country is feeling the effects of China’s slowdown. Weakness in industrial activity and trade and a lower grain production have led the Reserve Bank of India to lower its growth forecast for the current fiscal year.