According to India's Commerce Secretary, Rahul Khullar, the country's trade gap may reach $160 billion in the current fiscal year. To help close the gap, India has signaled it will take advantage of all trade opportunities, including maintaining rice exports to Iran despite US sanctions. Namas Bhojani / Bloomberg

India's trade deficit widened to a three-month high in January as import growth outpaced the climb in exports, the top bureaucrat in the commerce ministry said.

Merchandise exports rose 10.1 percent to $25.4 billion last month from a year earlier, Commerce Secretary Rahul Khullar told reporters in New Delhi on Thursday. Imports gained 20.3 percent to $40.1 billion, leaving a trade deficit of $14.7 billion, he said.

A trade gap Khullar said may reach $160 billion in the current fiscal year threatens to revive pressure on the rupee after it tumbled the most in Asia last year. Europe's debt crisis has curbed overseas sales by nations from Thailand to China, and the Reserve Bank of India has signaled interest-rate cuts to shield growth providing inflation slows further.

"The slowdown in the industrialized nations is affecting demand for India's exports," N.R. Bhanumurthy, a New Delhi-based economist at the National Institute for Public Finance and Policy, said before the report. "That will put pressure on the rupee to weaken."

The slowdown in Europe is weighing on exports, Khullar said, adding the current-account deficit may reach 3.5 percent of GDP in the 12 months through March. The next fiscal year will be a tough one for overseas sales, he said.

India's government two days ago predicted the weakest economic expansion this year since 2009. GDP will probably rise 6.9 percent in the 12 months through March from a year earlier, it said. Asia's third-largest economy expanded 8.4 percent from 2010 to 2011.

Growth has slowed after the reserve bank raised rates by a record amount from 2010 until October last year to fight price gains and as Europe's turmoil and policy gridlock deter investment.

The central bank on Jan 24 cut the amount of deposits lenders need to set aside as reserves for the first time since 2009, seeking to ease a cash squeeze and bolster expansion. It left the repurchase rate at 8.5 percent for a second meeting.

Thursday's report showed the climb in exports was the fastest in three months. At the same time, it fell short of the pace recorded each month from November 2009 through October 2011.

India said it will step up trade with Iran even as international sanctions against the Persian Gulf state over its nuclear program are tightened.

India, which buys about $9.5 billion of crude oil annually from Iran, plans to send a trade delegation to Teheran in a bid to boost exports of goods not covered by United Nations restrictions, Khullar told reporters in New Delhi on Thursday.

"If opportunities emerge" as other nations halt commerce with Iran "then we will snap them up", Khullar said. "We will be mounting a mission to Iran at the end of the month to promote our own exports."

India will continue to buy Iranian oil and opposes sanctions on the Islamic Republic from anyone except the UN, Ranjan Mathai, India's foreign secretary, said on Jan 17.

India will also keep exporting rice to Iran, its biggest buyer, as the two nations take steps to clear delayed payments and boost trade.

The country will maintain shipments of basmati rice at 1 million tons a year, said Vijay Setia, president of the All India Rice Exporters Association.

Iranian buyers defaulted on payments for as much as 200,000 tons of rice in the past few months, said Setia in a phone interview. India appointed UCO Bank to open letters of credit in rupees for trade with Iran and that may help exports to continue, he said.

Export "terms will be re-written and business will continue", Setia said.