India has technically entered into a recession with a likely contraction in its GDP during the July-September period, according to a report by the Reserve Bank of India (RBI). The report has been prepared by a team of economists including Michael Patra, the central bank’s deputy governor in charge of monetary policy, and was published for the first time in "nowcast," which is an estimate based on high-frequency data.
This situation has pushed India into an unprecedented recession.
"India has entered a technical recession in the first half of 2020-21 for the first time in its history," the authors wrote in the report.
RBI's Economic Activity Index estimates that India's GDP growth for the second quarter of the current financial year was negative and the GDP contracted by 8.6 percent during the quarter.
"India has entered into a technical recession in the first half of 2020-21 for the first time in its history with Q2:2020-21 likely to record the second successive quarter of GDP contraction," it said.
The economy had slumped about 24% from April to June.
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The contraction is ebbing with gradual normalization in activities and expected to be short-lived.
The RBI report said that at a time when global economic activity is besieged by the outbreak of the second wave of Covid-19, incoming data for the month of October 2020 have brightened the near-term outlook for the Indian economy and stirred up consumer and business confidence.
"Since the assessment of the performance of the Indian economy in the first half of 2020-21 that was presented in the Monetary Policy Report of October 2020, several developments point to a window of respite opening up and an unshackling of economic activity from the grip of Covid-19 as the festival season sets in," it said.
“Lurking around the corner is the third major risk -- stress intensifying among households and corporations that has been delayed but not mitigated, and could spill over into the financial sector,” the economists concluded. “We live in challenging times.”
However, the government is due to publish official statistics on November 27.