According to a report by the country’s central bank, India has entered into a technical recession in the first half of the 2020-21 fiscal year (April 2020-March 2021) for the first time in its history.
A report released late Wednesday by a team led by Michael Patra, a deputy governor at the Reserve Bank of India (RBI), indicates that Asia’s third-largest economy has probably shrunk for the second straight quarter (July-September), pushing the country 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. The government is due to publish official statistics on Nov. 27. The median forecast in a Bloomberg survey of economists sees a contraction of 10.4% in the July-September quarter.
Gross domestic product contracted 8.6% in the quarter ended September, the Reserve Bank of India showed in its first-ever published ‘nowcast,’ which is an estimate based on high-frequency data. The economy had slumped about 24% from April to June.
Stating about living in challenging times, the report said, “Lurking around the corner is the third major risk– stress intensifying among households and corporations that have been delayed but not mitigated, and could spill over into the financial sector.”
The coronavirus is spreading faster in India than anywhere else globally, with more than 8.7 million people already infected and related deaths at over 128,000. COVID-19 has kept tens of millions of people shut indoors and made many millions jobless in the world’s second-most populous country.
The second wave of COVID-19 to the global economy could impact the recent recovery in exports as external demand threatens to collapse as commodity prices indicate, the report said.
However, on an optimistic note, the RBI report said that the Indian economy would break out of contraction of the six months gone by and return to positive growth in the October-December quarter of 2020-21. Incoming data for October 2020 have brightened prospects and stirred up consumer and business confidence, it said.