Declining for the fifth month in a row, exports dropped by 10.78% to $23.69 billion under the impact of global slowdown, widening the country's trade gap to a 16-month high of $18 billion in September.
However, imports grew by 5% after four months of decline, to $41.77 billion, from $39.75 billion in September 2011.
Trade deficit in September 2011 was $13.19 billion.
"The contraction in global demand and deceleration in manufacturing are primary reasons for decline in exports," Federation of Indian Export Organisations (FIEO) President Rafeeque Ahmed said.
However, the situation may improve in the second half of the fiscal, he said.
For the cumulative April-September period, exports dipped by 6.79% to $143.6 billion from $154.1 billion in the same period last year.
"The markets in Europe, the US and Japan are still not showing healthy growth," Ahmed said.
Sharing similar views, Apparel Export Promotion Council (AEPC) Chairman A Sakthivel said the raising cost of fuel and inflation is hurting the exports.
Imports during the first half of the fiscal contracted by 4.36 per cent to $232.92 billion. Trade deficit during the period stood at $89.25 billion from $89.39 billion in April-September 2011.
Oil imports during September increased by 30.74% to $14.09 billion from $10.77 billion in the corresponding period last year.
The trade deficit is a cause of concern as it leads to increase in the country's current account deficit. India witnessed such large trade gap in May 2011, when the figure was $18.4 billion.