Amid the crisis imposed by the global pandemic of coronavirus disease (Covid-19), India’s economy declined by 7.5% in the second quarter of July-September of the current fiscal year 2020-21. The Gross Domestic Product (GDP) had recorded a 23.9% drop in the first quarter April-June due to the epidemic and the preventive lockdown imposed on the country due to it.
This figure of GDP is better than what some ‘experts’ had predicted as the RBI and some rating agencies had predicted a greater drop: around 8.6%. However, technically the country is stuck in an economic downturn, as it has recorded a second consecutive fall in GDP in the September quarter.
GDP growth rate in July-September last year
According to the data released by the National Statistics Office (NSO), there was a growth of 4.4% in GDP (GDP) in the same quarter of FY 2019-20. Due to the Covid-19 epidemic and the lockdown imposed for its prevention, the economy suffered a major decline of 23.9% in the first quarter of April-June of the current financial year. Now
It is noteworthy that China’s economic growth rate was 4.9% in the July-September quarter while it increased by 3.2% in the April-June quarter.
Using the immediate forecast method, central bank researchers have estimated that the GDP size will decrease by 8.6% in the July-September quarter. Earlier, the RBI had projected a 9.5% decline in GDP in the current financial year. A report prepared by RBI researcher and Pankaj Kumar of the Department of Monetary Policy states that India is technically caught in an economic downturn for the first time in its history in the first half of 2020-21.
Who had estimated how much of GDP growth or fall
- Reserve Bank of India had projected to decline of 8.6% in the GDP growth.
- India Ratings had forecast a decline of 11.9%.
- State Bank of India had forecast a decline of 10.7%, Bank of Baroda by 8%.
- In the second quarter, Nomura had predicted a decline in India’s GDP by 10.4% and Barclays 8.5%.
- The Bank of America-Merrill Lynch report estimated the Indian GDP to fall by 7.8%.
- Morgan Stanley expected GDP growth to fall by 6%.
- ICRA had forecast India’s economic growth to fall 9.5% in the July-September quarter.
- The CARE rating forecast a 9.9% drop in GDP growth.
In the simplest terms, the slowdown in an economy is a phase comparable to its expansion. In other words, when the production of goods and services, typically measured by GDP, moves from one quarter (or month) to another, it is called an expansionary phase of the economy. When GDP decreases from one quarter to another, the economy is said to be in a recession.
When is it a recession?
When the economy slows down for long periods, it is called recession. That is, when GDP is low for a long and sufficient period, it is called a recession. While there is no accepted definition of recession, most economists agree with this definition, which is also used by the National Bureau of Economic Research in the US.
According to the National Bureau of Economic Research, during a recession, there is a significant decline in economic activity. It can continue for a few months to more than a year. The “depth, spread, and duration” of a decline in economic activity is also determined to see if an economy is in a slump or not.
For example, the US has witnessed the most recent decline in economic activity, — due to the Covid-19 epidemic. The decline in economic activity has been so much that it has been considered as a recession.