Prime Minister Manmohan Singh has been more forthcoming than his ministers, to accept that troubles in the major world economy would hit India as well. "Sooner or later, the economy is bound to experience the pain," Singh said.

It is only in the past few weeks that Finance Minister P. Chidambaram and Commerce Minister Kamal Nath have started showing some concern over the fall-out of the global crisis on India.

The export sector is now the victim. Exports grew by over 35 per cent for the April-August period. But then, with the US and Europe being among the biggest two markets for the Indian exporters, the impact of recession in these economies was bound to hit exports.

Though the commerce ministry is yet to release the figures, global economic crisis has hit India where it hurts the most. Over a dozen job-oriented export sectors slipped into disarray showing up to 70 per cent negative growth in September over a year-ago period.

Decline in several sectors….

The government is now alarmed by sharp decline in export value in tea (-20 per cent), handicrafts (-70 per cent), carpets (-32 per cent), oil meals (-50 per cent), man-made yarn (-17 per cent), cotton yarn (-19 per cent) and marine products (-19 per cent). With several sectors putting up a dismal show, the overall export growth in September this fiscal plunged to a little over 10 per cent from 26.9 per cent in August.

The volume of decline in the international trade is also reflected in the crash in the shipping rates. Rates for bulk cargo have dropped by nearly 50 per cent.

Rupee decline of no help...

Ironically, dismal export perfor-mance in September has come about in the face of close to 25 per cent depreciation in rupee value. A declining rupee results in better realizations for the exporters.

Big stores in the US and Europe are cancelling purchase orders from the Indian exporters, who are also facing the problem of payment defaults from international buyers.

"Even their (US and Europe) big stores are canceling the orders," Textile Minister Shankarsinh Vaghela said last week. Indian textile exporters send 70 per cent of their shipments to American and Eurpoean stores.

Though exporters stand to benefit from a sharp rupee depreciation, they are facing payment defaults from their buyers. The letters of credit are being cancelled by banks. Experts feel the textile industry would see a negative growth in the current fiscal. "Indian garment exporters are expecting 10 per cent decline due to the global recession this year,” said Apparel Export Promotion Council Chairman Rakesh Vaid .

There is a question of job losses. Reports suggest that artisans in the handicraft city of Moradabad in Uttar Pradesh have been fired by the exporting firms. They are pulling cycle-rickshaws for their survival. Reports of workers losing jobs are also coming from other textile clusters like Panipat in Haryana and Tirupur in Tamil Nadu.

The sad part is that the government is trying to wash its hands off the problem. "This is an issue of private firms: government cannot do much about it,“ Vaghela said.

Widening trade deficit

Sloppy exports have also led too widening of the country's trade deficit. Along with the foreign institutional investors pulling out of the country's stock market, India's overall current account balance would come under severe pressure. No wonder, rupee fell well below 50 to a dollar.

On the back of rising imports, India's trade deficit has widened by 42.2 per cent to $ 49.13 billion during April-August 2008, from $ 34.54 billion in the same period last year. The deficit in August increased by over 93 per cent to $ 13.94 billion in the same period last year.

The rupee has fallen 25 per cent since April this fiscal year. "FII outflows of $ 12 billion have contributed to the rupee sliding from 40 to 50, which severely tests theories supporting the inherent strength of our economy. The ferocity and pace of the decline is alarming. The rupee has fallen the sharpest compared to other currencies," says FICCI president, Rajeev Chandrasekhar.

China is also facing the impact of cut in consumer spending in America and Europe. China's economic growth, which has slipped to single digit for the first time in over six years, would be severely impacted by dwindling exports: "our economy is highly reliant on overseas demand. Slacking exports resulted from the global economic slowdown would have a negative impact on the ecomomy," said Zhou Xiaochuan, governor of China's central bank.