India’s trade deficit narrowed in February to its lowest since September 2013 as exports contracted at a slower pace. However, demand remains 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.

The 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.

Cheaper Chinese exports have undercut India’s engineering exports, which constitute around a quarter of total goods exports.

Merchandise exports, equivalent to about 15 per cent of India’s economy, contracted for the 15th straight month in February. They fell 5.66 per cent from a year earlier. The outlook for exporters remains bleak mainly due to the global slowdown, and annual exports could fall to near 260 billion dollars in the current fiscal year, compared with 310 billion dollars in the previous year.

India’s economy is estimated to grow at 7.6 per cent in the current fiscal year ending March. February imports fell 5.03 per cent from a year earlier.