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India enters phase of technical recession: RBI

  • IASbaba
  • November 15, 2020
  • 0
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India enters phase of technical recession: RBI

Part of: GS Prelims and GS-III – Economy

In news

  • In RBI’s monthly bulletin of November, it has started “nowcasting” or “the prediction of the present or the very near future of the state of the economy”.

Key takeaways 

  • The very first “nowcast” predicts that India’s economy will contract by 8.6% in the second quarter (July, August, September) of the current financial year.
  • This pace of contraction is considerably slower than the 23.9% decline in the real GDP during the first quarter. 
  • However, the contraction of Q2 is crucial because it implies that India has entered a “technical recession” in the first half of 2020-21— for the first time in its history.

Important value additions 

Recessionary phase

  • It is a phase when the GDP contracts from one quarter to another. 

Recession

  • When a recessionary phase sustains for long enough, it is called a recession.
  • During a recession, a significant decline in economic activity spreads across the economy and can last from a few months to more than a year.

Technical recession

  • When real GDP has declined for at least two consecutive quarters.

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