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Indian Economy

Technical Recession in India

  • 13 Nov 2020
  • 3 min read

Why in News

According to the Reserve Bank of India's, “nowcasting”, India’s economy will contract by 8.6% in the second consecutive quarter (July, August, September) of the current financial year which means the economy is in a ‘technical recession’.

  • In simpler words, a technical recession is two quarters in a row of economic contraction.

Key Points

  • Nowcast:
    • Nowcast in economics means the prediction of the present or the very near future of the state of the economy.
    • Nowcast began with the first issue of the Bulletin in January 1947, but interrupted during the period 1995 to date.
  • Current Scenario:
    • In the second quarter the pace of contraction is 8.6%.
    • This is considerably slower than the 23.9% decline in the real GDP during the first quarter (April, May, June).
  • Implication:
    • The contraction implies that India has entered a technical recession in the first half of 2020-21 for the first time in its history.

Key Economic Words

  • Gross Domestic Product (GDP) is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year.
  • Expansionary Phase: When the overall output of goods and services typically measured by the GDP increases from one quarter (or month) to another.
  • Recessionary Phase: When the overall output of goods and services typically measured by the GDP decreases from one quarter (or month) to another.
  • Business Cycle: It is composed of concerted cyclical upswings and downswings in the broad measures of economic activity which are output, employment, income, and sales in other words it is a cycle created by the expansionary and recessionary phases clubbed together.
  • Recession: It is a macroeconomic term that refers to a slowdown or a massive contraction in economic activities for a long enough period, or it can be said that when a recessionary phase sustains for long enough, it is called a recession.
  • Depression: It is a deep and long-lasting period of negative economic growth, with output falling for at least 12 months and GDP falling by over 10% or it can be referred to as a severe and prolonged recession.

Source:IE

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