It is an oft-bandied about
statement that India is in 'recession'. Especially so in the last couple
of years of economic slowdown. However, it will be officially true from
today, when the government announces the July to September Q2 GDP
figures. Expectations are that the economy will contract, though it will
be on much better footing than the nearly 24 per cent decline in the
first quarter (April to June).
Though periods of economy stagnation often get billed as 'recession',
officially, a nation is said be in recession only if it has two
consecutive quarters of GDP decline.
Going by that yardstick, the official announcement of Q2 figures,
expected on Friday, will mark the first time in India's history that it
plunges into recession.
Estimates by various agencies have put Indian economy declining anywhere from 8.6 per cent to 11 per cent or more. As for the whole year (financial year 2020-21), India's economy will decline by 9.5 per cent, as per the estimate of the RBI.
An article in RBI's monthly bulletin released last fortnight had put
the Q2 drop at 8.6 per cent. “India has entered a technical recession in
the first half of 2020-21 for the first time in its history with Q2
likely to record the second successive quarter of GDP contraction,” says
Pankaj Kumar from RBI's Monetary Policy Department in the article,
though he reassures that the decline will be "short-lived".
Different agencies have forecast different figures, all around minus
10 per cent, for the contraction of economy in Q2. While Bank of
America's estimate is the most hopeful at -7.5, the National Council of
Applied Economic Research (NCAER) being cautious at -12.7. Other major
estimates range from State Bank of India's -10.7, ICRA's -9.5 and
Barclay's -8.5.
Indian economy was in a 'slowdown' and not recession through the
downturn of 2018 and '19, dropping from a growth rate of 5.2 down to 3
per cent in the January-March quarter of this year, just as coronavirus
hit. The nationwide lockdown announced at the end of March and remained
in place in various forms into June ensured that the first quarter of
financial year 2020-21 saw the GDP deep-diving to 23.9 per cent.
However for Q2 (July to September), the re-starting of economic
activities, the pent-up demand and the festive season rush has
definitely seen things looking up. The purchasing managers indices for
manufacturing and services had improved, while exports also finally came
back on the growth path. In fact, the uptick in indices was so much
that SBI actually revised its forecast from 12.5 per cent de-growth to
just 10.7 earlier this month. Agriculture, fisheries etc have been a
bright spot, doing well throughout these troubled months, almost like a
ray of life amidst dark clouds.
Yet, it may not be enough to save India from the inevitable tag of
'recession'. It is also expected to fare the worst among all major
global economies as far as recovery goes. How well Q2 has been for India
will be known when the National Statistical Office releases the GDP
data today.
