India enters technical recession for the first time

The Indian economy contracted 7.5% in the second quarter of the financial year 2020 - 2021 (July - September), reported the Ministry of Statistics and Program Implementation (MOSPI) on Friday, continuing the contraction of the Indian economy, Report says.

However, this figure is better than that of the first quarter, where India's economy contracted 23.9% in the first-ever economic decline in over 40 years. This contraction in the second quarter confirms that India has for the first time entered a 'technical recession'; financial jargon to indicate that an economy has faced two successive quarters of decline.

Except for agriculture and farming, all sectors of the economy, manufacturing, and electricity, which grew at 3.4%, 0.6%, and 4.4% respectively, posted a decline. Construction declined 8.6%; trade, hotels, and transport fell at 15.6%, finance, and real estate at 8.1%, mining at 9.1%, government, public administration, and defense at 12.2%. Therefore, India's gross value added in this period declined 7% - a measure of various economic sectors' income side.

Earlier this month, the Reserve Bank of India, using a short-range 'nowcasting' model of 27 high-frequency indicators, found that the economy had contracted 8.6% in the second quarter and had entered a technical recession. Today's numbers corroborate this forecast.

The RBI has estimated a 9.5% decline for the year during its October policy announcement. The first official number came from a public authority since the lockdown was announced in March and RBI Governor Shaktikanta Das indicated an economic contraction in May. International organizations, namely the International Monetary Fund, estimates a 10.3% fall and the World Bank a 9.6% contractions. Goldman Sachs, on the other hand, goes a notch up and estimates a 14.8% decline.