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A recessionary phase is when the total value of output produced falls from one quarter to the next which is often measured in GDP. This one differs from an expansionary phase where the contradiction happens and the GDP rises. These recessionary and expansionary phases combine a series which is known as a Business Cycle.

There’s a prominent difference between a “technical recession” and a “recession”. A technical recession is mostly used to capture the trend in GDP, whereas a recession includes several economical activities including employment, household, and corporate incomes, sales at businesses, etc. A technical recession is often caused by a one-off event just like it happened with the Covid-19 pandemic and the following lockdowns. However, the duration is short-lived.

The Economy is Contracted by 7.5%: India enters ‘Technical Recession’

According to the economic data for the July-September quarter released by India’s National Statistical Office, India was in the midst of a technical recession due to the covid-19 outbreak and the strict lockdowns. It’s revealed that the Indian economy was contracted by 7.5% in the last quarter followed by an unprecedented contraction of 23.9% in the previous one. The recession took place even after the government lifted up the 2-month strict lockdown.

The economical data further reveals that the industry is normalizing faster than the service sector of the country. Manufacturing has increased by 0.6% in the July-September quarter which was massively shrunk by 39% during the previous quarter. The agriculture sector has seen a growth of 3.4% even though trade and services were contracted by 15.6%, according to the economical report.

The April-June quarter brought a 23.9% GDP contraction that triggered huge unemployment in the MSME sector and increased rural distress. After the lockdown was lifted, the government announced stimulus packages including a $266 billion package in May to boost consumer demand and manufacturing in the country. A larger part of the package includes loans from banks and a number of them without collateral.

Another package of $35.14 billion was introduced in November to stimulate the economy after the coronavirus pandemic. The goal was to attract investment and enable India to be a part of the global supply chain again. Finance minister Nirmala Sitharaman claimed that a stronger economy is in progress since there’s an increase in tax collections for goods and services.

Technical Recession in Other Economies

The Covid-19 pandemic has impacted various economies worldwide. Indonesia slid to a recession for the very first time in 2 decades as its GDP shrank 3.49% in the last quarter. It is to be noted that Indonesia has the largest economy in Southeast Asia. Prior to that, the preceding quarter was faced with a 5.32% contraction. Indonesia was previously in the same circumstances in the 1990s during the Asian Financial Crisis.

The UK recession happened when its economy hit a record output of 21.7% in the April-June quarter. The country’s GDP shrank by 1.6% in the first quarter of 2020. Whereas, Brazil’s economy also experienced an 11.4% contraction during the June-end quarter followed by a 0.3% fall in output, resulting in the recession.


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