The Indian economy has likely entered into a recession for the first time in history in the first half of the fiscal year 2020-21, according to Reserve Bank of India.
According to a team of economists, including Michael Patra, the central bank’s deputy governor in-charge of monetary policy, the economy shrank for the second straight quarter, reported Bloomberg Quint.
In August, the government reported a 23.9 percent contraction in its Gross Domestic Product (GDP) for the April-June quarter. The central bank has ‘nowcast’ that Gross Domestic Product (GDP) for the July-September quarter is set for a contraction of 8.6 percent.
‘Nowcasting’ is the prediction of the present or the very near future of the state of the economy, reported The Indian Express.
The RBI in its ‘State of the Economy’ report stated that “India has entered a technical recession in the first half of 2020-21 for the first time in its history,”
The government will publish the official statistics on 27 November.
However, as per RBI report, the estimates of the National Statistical Office (NSO) that are expected at the end of November 2020 will formally bear out the extent of improvement that occurred in the quarter gone by.
Incoming data for the month of October 2020 have brightened prospects and stirred up consumer and business confidence, it said.
“With the momentum of September having been sustained, there is optimism that the revival of economic activity is stronger than the mere satiation of pent-up demand released by unlocks and the rebuilding of inventories. If this upturn is sustained in the ensuing two months, there is a strong likelihood that the Indian economy will break out of contraction of the six months gone by and return to positive growth in the third quarter (Q3) of 2020-21.”State of Economy, RBI report
Rahul Blames PM Modi
Targetting PM Narendra Modi over the RBI’s reports, Congress leader Rahul Gandhi said that India has entered into recession due to PM Modi’s actions.
“India has entered into recession for the first time in history. Mr Modi’s actions have turned India’s strength into its weakness,” tweeted Gandhi along with a news clipping.
The Arvind Kejriwal-led Aam Aadmi Party (AAP) also targeted Finance Minister Nirmala Sitharaman over the RBI report.
“Congratulations to Finance Minister Nirmala Sitharaman for achieving this feat,” the party’s official Twitter handle wrote on the micro-blogging platform.
Earlier in October, the IMF projected that the economy is likely to bounce back with 8.8 percent growth rate next year and even regain its position as the fastest-growing emerging economy. The IMF also projected that India will surpass Bangladesh again in 2021.
The Gross Domestic Product (GDP) for the first quarter ended June contracted 23.9 percent, revealing the extent of damage the pandemic and the subsequent lockdowns have caused to the country's economy.
(With inputs from Bloomberg Quint, The Indian Express)
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