India's exports during the month of July 2012 dropped to US$ 22.4 bn, a decline of 14.8% over the same month last year. It is worth noting that this is the steepest decline in the last three years. The main reason for the drop is the ongoing sovereign debt crisis in the Eurozone and the slowdown in the US. This is a clear indicator of the ongoing slowdown in the global economy. But India's domestic economy is also showing clear signs of a slowdown. While exports declined, imports during the same period also dropped by 7.6% to US$ 37.9 bn.
The government had set a lofty exports target of US$ 360 bn for this year. Looking at the current grim situation, the government has already admitted that achieving the target would be quite challenging. With all major economic indicators pointing towards a slowdown, the Indian economy is likely to face some serious challenges in the medium term.