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India in historic technical recession, says RBI in first-ever ‘nowcast’

Essar Oil's refinery at Vadinar village, near Jamnagar, in India. Unlike the US and Australia, India is a net importer of fossil fuels. Photo: AFP. Sketched by the Pan Pacific Agency.

NEW DELHI, Nov 12, 2020, India Today. India’s economy is likely to have shrank for a second consecutive quarter, signalling the first-ever ‘technical recession’ in the country’s history. A team of economists including Michael Patra, the Reserve Bank of India’s deputy governor in charge of monetary policy, have stated the same in the central bank’s first-ever ‘nowcast,’ India Today reported.

Nowcast is a prediction based on high-frequency data about the future state of the economy. The economists have written that the Gross Domestic Product (GDP) contracted 8.6 per cent in the quarter ended September (second quarter), following the near 24 per cent slump in the first quarter of the year.

“India has entered a technical recession in the first half of 2020-21 for the first time in history,” said the economists. Official statistics will regarding the same will be published by the government on November 27.

While making the prediction about the future state of the economy, the RBI economists focused on how companies performed during the slowdown. The team of economists, however, said India will return to growth in the October-December quarter if the recovery is sustained.

The economists have highlighted several positive economic indicators like good vehicle sales growth and higher banking liquidity.

However, the economists also wrote in the RBI’s bulletin that there is a grave of “generalisation of price pressures, unanchoring of inflation expectations feeding into a loss of credibility in policy interventions”.

The economists also raised an alarm over global growth due to the ongoing wave of fresh Covid-19 infections.

The fresh prediction comes at a time when financial services company Moody’s has revised India’s 2020 GDP target. Moody’s now expects an 8.9 per cent decline as compared to its previous forecast of 9.6 per cent.

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