Exports fell 9.9 per cent in November, the second straight month of negative growth, as demand vaporised in the US and Europe, but falling inflation offered a compelling excuse for RBI to lower policy rates to help stimulate consumer spending at home.

Exports dropped to USD 11.5 billion in November this fiscal from USD 12.7 billion a year ago, while imports grew by 6.1 per cent to USD 21.5 billion. As a result, trade deficit widened by over USD 10 billion.

Although a nearly Rs 35,000 crore worth stimulus package was unveiled in December to help the industry from the global economic downturn, the government in the Mid-Year Review tabled in Parliament felt there is a strong case for RBI to signal even lower interest rates as inflation is waning.

Inflation, measured by wholesale prices, fell to 6.38 per cent for the week ended December 20 courtesy cheaper food and fuel prices.

Making a case for easing monetary stance in view of falling prices, ICICI Bank CEO and Managing Director K V Kamath had said, "I think just now let us start by cutting them (repo and reverse repo rates) by 1 (percentage point) or so, and see what happens." India's industrial production fell 0.4 per cent, slipping into negative zone for the first time in 15 years, in October as a result of a massive drop in demand resulting from the global economic crisis.

With the US and several European countries slipping into full-blown recession, Indian exporters have run into difficult times, especially since October when exports contracted by 12.1 per cent, the first time in five years.

For the April-November period, the country's cumulative exports grew by 19.4 per cent to USD 119.30 billion -- far short of the USD 200 billion target set for FY'09.