US and European importers of merchandise like bags, apparel and jewellery are asking their Indian suppliers to ship cheaper products, as the purchasing power of inflation-battered consumers in those markets has declined.

Shoes and bags made of synthetic leather are increasingly replacing items of natural leather in export orders for Indian suppliers, as they are as much as 35% cheaper than the original. While buyers are seeking a cut in export prices for apparels, demand has increased for lab-grown diamonds, which cost less than half the natural ones.

A half-century-high inflation in the eurozone has led the European Central Bank to increase interest rates by three quarters of a percentage point last week from zero and warn about further rate hikes. Recessionary concerns are also high, weighing on consumer sentiment. The bloc's big four economies - Germany, France, Italy and Spain - have all had their growth forecasts for 2023 cut by the International Monetary Fund, with rising interest rates and uncertainties from the Russia-Ukraine war being the key reasons.