Exports contracted 12.7 per cent in April to $34.66 billion — the third straight month of decline — on account of poor demand in the key EU and US markets, and it may take some more months for the situation to improve.

But imports declined at a greater rate of 14 per cent, which dragged down the trade deficit to a 20-month low of $ 15.24 billion, government data showed.

The market is "not looking very good as far as Europe is concerned, and the US also we have seen a decline in demand. For the next 2-3 months, I think the demand scenario does not look very optimistic," Director-general of Foreign Trade Santosh Kumar Sarangi told reporters here.

However, he expressed hope that things would change from September.

"There is a possibility that opening up of the Chinese economy combined with some boost in demand in Europe and the US economy from August-September onwards might give a boost to global exports," he said.

Imports fell for the fifth month in a row to $49.9 billion against $58.06 billion recorded in the same month last year, the data showed.

Sarangi said the decline in imports is because of cooling down of commodity prices and reduced demand for products which are considered as discretionary such as gems and jewellery.

He suggested diversifying into products which have higher export demand such as electronic goods, oil meals, oil seeds and agricultural goods.

In April, export sectors which recorded negative growth included petroleum products, gems and jewellery, engineering goods, chemicals and ready-made garments of all textiles. “The decline in trade deficit was driven by non-oil items, with the fall in crude prices partly absorbed by higher volumes,” Aditi Nayar of Icra said.