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Sunday, April 11, 2021

India is in historic technical recession, says RBI in its first-ever nowcast

The Reserve Bank of India (RBI) has given a clear signal that India has entered a technical recession in the first half of 2020-21 for the first time in its history. The Nation’s economy probably shrank for a second straight quarter. According to a team of economists including Michael Patra, the central bank’s deputy governor in charge of monetary policy is pushing the country into an unprecedented recession.
The GST (Gross domestic product) contracted 8.6% in the quarter ended September. This was shown by the RBI in its first-ever published ‘nowcast’ which is an estimate highly based on high-frequency data. During the period between April to June, the economy had slumped about 24%.

Image Credits: Bloomberg

The Reserve Bank’s number is facing ups and downs due to the cost cuts on companies that boosted operating profits. The team of economists (authors of the nowcasts) also used a number of indicators from flush banking liquidity to vehicle sales to signal the illuminating prospects for October. If this growth is sustained then the Nation’s economy will return to growth in the October-December quarter, earlier than projected by Governor Shaktikanta Das last month, when he pledged to keep monetary policy accommodative.

However, “there is a grave risk of generalization of price pressures, unanchoring of inflation expectations feeding into a loss of credibility in policy interventions,” the team of economists wrote in the Reserve Bank’s bulletin.

Further, “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.

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Mayuresh Patil
My Instagram says I am silent-ink, My Facebook says I am a Newsy Guy. And My Gmail says I am an Utter Chaos. To sum up, a combination of Creativity + Simplicity. Also, never underestimate the power of words.

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