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The Indian economy enters its ” first technical recession” officially

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The Indian economy has contracted 7.5 per cent during the July to September period making it one of the worst-performing major advanced and emerging economies. Moreover, with this result today,  it has officially entered a technical recession for the first time since independence.

Even though the figures showed an improvement on the disappointing 23.9 percent contraction recorded in the previous quarter, they push Indian economy in what could be its worst phase. The numbers indicate that Asia’s third-largest economy struggling hard as it attempts to revive demand and create jobs even as coronavirus infections climb.

What lies ahead for India? How bad is the figure and what is technical recession?

When the two successive quarters of any country record contraction it means that the country has now entered a “technical recession.” It has come under this tag for the first time since its independence, that is 1947.

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After lockdowns were imposed to contain the spread of the novel coronavirus across the globe, the growth recorded by major economies during the quarter ending on September 30 led analysts to optimistically believe in the hopes of India enjoying a revival.

But, even with a boost in consumer businesses due to increased spending on account of the festivities during October-November hopes of a broader recovery were dashed. The most affected sectors are construction and hospitality while farming has been a relatively bright spot in these dark times. Manufacturing activity has also witnessed an increment during the talked about period (July to September)  after dropping as much as 40 percent in the previous quarter. The last quarter results were highly depressing due to the nationwide lockdown. According to analysts the figures are still encouraging and they are optimistic that that the economy will perhaps fare better in the coming three months.

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Sameer Narang, chief economist at the State Bank of Baroda, claims that the Indian economy has already left the worst phase behind by looking at all the indicators and a continued improvement is expected to prevail. He also said that the data released Friday had beaten the estimated by the bank ( The bank estimated an 8 percent contraction).

The surge in manufacturing blended well with the drooping economy and turned out to be a savior for the Indian economy, especially after factories were shut down because of prolonged closures following the months-long lockdown implemented in March.

What is the major reason behind the results?

The Indian recovery pathway is majorly controlled by the manufacturing sector and not the services sector. A similar trend was visible in other major economies as well, even before Covid-19 rolled out. During the pandemic, manufacturing was struggling a bit so these number give out a ray of hope by being the encouraging signs.

What were the estimates and expectations?

According to estimates released last month by  Shaktikanta Das, governor of the Reserve bank of India (RBI), the struggling economy was expected to shrink 9.5 percent this year. Meanwhile, The International Monetary Fund (IMF )predicted a contraction of 10.3 percent in the current year in the Indian economy. This, could have been the biggest slump for any major emerging economy and the worst since independence.

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A report released this month by Oxford Economics stated that Indian economy would be the worst-affected economy even after the virus is contained and the pandemic eases. The report also stated that the annual output of the country would be nearly 12 percent below pre-virus levels through 2025.

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Even before the pandemic, Indian economy had struggled to gain traction. The problems and struggles were further elevated by the hit to global activity from the virus. The country had also imposed one of the world’s strictest lockdowns to deal with the deteriorating situation. All these combined together, ultimately gave the country a severe blow.

The vast country of 1.3 billion people witnessed a complete shutdown that left huge numbers of people unemployed and jobless almost overnight. Tens of millions of migrant workers who earned their bread and butter from the shadow economy also suffered enormous struggles. The centre tried to assist the effected by announcing two stimulus packages to offer farmers easier access to credit as well as by declaring benefits to support small businesses.

But lately, the government has been easing restrictions in order to revive economic activity.

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