By Manoj Kumar
NEW DELHI (Reuters) - India's trade deficit narrowed slightly in August, data showed on Thursday, a move that will strengthen the government's case for rejecting exporters' calls for a competitive boost through a rupee devaluation.
The trade deficit in the first five months of the current fiscal year has fallen by more than 40 percent to $34.7 billion, the figures also showed, as a double-digit slide in imports has outpaced a smaller drop in exports.
The positive shift in the terms of trade has helped shield India from slowing global growth and helped it outperform other major emerging economies - its growth rate of more than 7 percent outpacing China's slowing economy.
Merchandise exports contracted by 0.3 percent year-on-year to $21.5 billion in August, data released by the Ministry of Commerce and Industry showed.
Imports dropped 14.09 percent to $29.2 billion, helping the trade deficit to narrow to $7.7 billion from $7.8 billion in the previous month.
India's gold imports fell for a seventh straight month in August to $1.1 billion as sluggish demand and record high discounts prompted banks and refineries to reduce overseas purchases of bullion.
India's exports account for just 1.7 percent of world trade, compared with nearly 12 percent for China. Prime Minister Narendra Modi wants to grab a 5 percent share of global trade by 2020. Analysts doubt that will happen.
Exporters have been lobbying the government and the central bank for a softer currency to support shipments amid sluggish global demand. India's exports have fallen in all but one of the past 21 months.
On Thursday, the Finance Ministry swatted down a media report of a possible devaluation of the rupee, and said the fall in exports was in line with with a global slowdown in trade.
Last month, Commerce Minister Nirmala Sitharaman called for a 200-basis point interest rate cut, underscoring the continuing pressure for monetary easing from voices within the Modi administration.
Meanwhile, services exports in July contracted 4.1 percent year-on year to $12.8 billion, data released by the central bank showed.
(Reporting by Manoj Kumar; Editing by Douglas Busvine)