Falling for the 15th month in a row, exports dipped 5.66 per cent in February to $20.73 billion due to contraction in shipments of petroleum and engineering goods amid tepid global demand.
Trade deficit, however, fell to near five-year low of $6.54 billion during February as imports too slowed down.
Imports declined 5.03 per cent to $27.28 billion last month, leading to a lower trade deficit of $6.54 billion compared to that of $6.74 billion in February 2015.
The trade deficit - difference between imports and exports - is the lowest since March 2011 when it was $5.6 billion.
The Commerce Ministry said the trend of falling exports is in tandem with that in other major world economies.
"The growth in exports have fallen for the US (10.35 per cent), European Union (7.62 per cent) and China (1.67 per cent) for December 2015," the ministry said.
The Federation of Indian Export Organisations (FIEO) said the drop in February was largely due to low export base in February 2015.
"Going by the current trend, we would touch $260 billion in 2015-16, a drop of about $50 billion in exports as compared to 2014-15," FIEO said in a statement.
Overseas shipments of petroleum products shrank 28.27 per cent to $1.83 billion in February, while that of engineering goods declined by 11.22 per cent to $4.56 billion.
For April-February, cumulative exports declined by 16.73 per cent to $238.41 billion, as against $286.3 billion in April-February period of 2014-15.
Imports too dipped by 14.74 per cent to $351.8 billion in the 11-month period, leaving a trade deficit of $113.38 billion. The trade gap was $126.29 billion in April-February 2014-15.
Oil imports last month were valued at $4.76 billion - 21.92 per cent lower than the same month last year. Non-oil imports too dipped by 0.47 per cent to $22.51 billion.
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.
After a sharp rise in January, gold imports in February declined 29.49 per cent to $1.39 billion.
Cheaper Chinese exports have undercut India's engineering exports, which constitute around a quarter of total goods exports.
The government's 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.
Merchandise exports are equivalent to about 15 per cent of India's $2 trillion economy.
Reserve Bank of India Governor Raghuram Rajan has rejected calls to devalue the currency, saying last week that the central bank would not target the rupee's exchange rate and would only intervene to curb volatility.
Exporters said the outlook remained bleak, mainly due to the global slowdown, and annual exports could fall to near $260 billion in the current fiscal year, compared with $310 billion in the previous year.
"We will be lucky if my exports could touch even 80 million rupees compared with 120 million rupees last year," said Arun Kumar Garodia, an engineering-goods exporter from Kolkata.
He said a rising import price for steel had hit his margins, forcing him to fire one-third of labour force.
India's economy is estimated to grow at 7.6 percent in the current fiscal year ending March.
(Agencies)
