May 1 (Bloomberg) -- India’s exports fell the most on record in March, extending the longest declining streak in a decade as the worst global recession since World War II damped demand for the nation’s products.

Merchandise shipments dropped 33 percent from a year earlier to $11.5 billion last month, the government said in New Delhi today. That was the biggest fall since at least April 1995, when Bloomberg data began. Exports slid 21.7 percent in February.

Central bank Governor Duvvuri Subbarao cut borrowing costs to a record low last week to support an economy growing at the slowest pace since 2003. Global trade, forecast by the World Trade Organization to contract by 9 percent in 2009, may suffer further as countries resort to protectionist measures, said economists including Rohini Malkani.

“If not adequately addressed, protectionism could turn out to be yet another headwind for an economic recovery,” said Malkani, a Mumbai-based economist at Citigroup Inc. Visa restrictions by the U.S. and tougher immigration laws by the U.K. could hurt Indian companies and remittances from workers overseas, she said.

India’s exports, which account for about 15 percent of the economy, grew 3.4 percent to $168.7 billion in the fiscal year ended March 31, missing a $200 billion target set by the government before the September collapse of Lehman Brothers Holdings Inc. accelerated the world financial and economic slump. The government expects exports to total $170 billion in the year that started April 1.

The decline in exports is likely to continue until September, India’s Trade Secretary Gopal K. Pillai said April 13. Falling overseas sales may cost India about 10 million jobs, according to estimates from the Federation of Indian Export Organisations, a lobby group.

Policy Response

The Reserve Bank of India on April 21 reduced the reverse repurchase rate and the repurchase rate by a quarter point each to 3.25 percent and 4.75 percent, respectively, dropping them to the lowest since they were introduced in 2000.

The government has announced three stimulus packages of tax cuts and public works spending to spur slowing demand, as declining sales force companies including vehicle maker Tata Motors Ltd. to pare output.

The central bank expects the $1.2 trillion economy to expand 6 percent in the fiscal year that started April 1, the slowest pace in six years.

Imports fell 34 percent in March from a year earlier and the trade deficit narrowed to $4.04 billion from $6.3 billion in the same month in 2008, today’ report showed. Oil imports slid 58 percent to $3.8 billion, while non-oil imports dropped 19 percent to $11.75 billion.

To contact the reporter on this story: Kartik Goyal in New Delhi at goyal@bloomberg.net.

Last Updated: May 1, 2009 02:34 EDT