Exports are likely to slip below $300 billion – far below the target of $360 billion set for the current financial year – due to the global demand slowdown, impacting the economy.
An internal note of the Commerce Ministry pegs exports in 2012-13 at $291 billion.
Even if the global market conditions start improving dramatically from now, merchandise exports at best could be $300-320 billion, the note added.
India had recorded the highest ever export of $307 billion in the last fiscal.
The economic crisis in the US and Europe is hitting India's exports. Both these markets account for about one-third of the country's total shipments.
During April-October 2012, the exports were estimated at $166.92 billion, down 6.2 per cent from a year ago period. In the last fiscal, shipments aggregated at $304 billion.
At the same time, huge oil and gold imports in the recent months have worsened India's trade deficit, which has touched an all time high of $21 billion in October.
The latest projection of the commerce ministry may further worsen the outlook for India's current account deficit (CAD), especially given the increasing imports, an official said.
Ballooning trade deficit have become a serious economic threat for the CAD that had touched a 30-year high of 4.2 per cent of the GDP or $78 billion in 2011-12.
CAD occurs when country's total imports and transfers are higher than its total exports and transfers.
"Increasing imports and widening trade deficit will definitely impact the country's CAD which will put pressure on rupee," FIEO Director General Ajay Sahai said.
The domestic currency has already fallen about 3 per cent against the US dollar over the past one month. It has touched 55.34 in early trade today.
Worried over the decline in exports, the government is considering to provide incentives to exporters to cushion them from the slowdown in western markets.
The Commerce Ministry, according to the official, has proposed interest subsidy for different sectors like engineering which are reeling under the impact of global