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.
- 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).
- 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.