RBI’s First-Ever Nowcast Suggests India Is In A Historic Technical Recession

Shikha Chaurasia

Pune, November 12 2020: India’s economy has been once again pushed into an unprecedented recession. According to a team of economists including the central bank’s deputy governor in charge of monetary policy Michael Patra, our economy shrank for a second straight quarter.

The Reserve Bank of India (RBI) has published it’s first-ever ‘nowcast’ which suggests that our economy has slumped down by 24 per cent in April to June. This means that our Gross Domestic Product (GDP) has contracted 8.6% in the quarter ended in September. The government is due to publish the official statistics by November 27.

The authors in the published nowcast have written that our country has entered a technical recession in the first half of 2020-21 for the first time in its history. The RBI’s number is afloat by cost cuts at companies who were successful in boosting operating profits even when the sales decreased.

The team of authors who have written in the nowcast have used a wide range of indicators from flush banking liquidity to vehicle sales to signal brightening prospects for October.

The Indian economy will return to its growth in the quarter of October-December, which is earlier than projected by the RBI governor Shaktikanta Das last month if the upturn is sustained.

The team of authors wrote in the RBI’s bulletin, “There is a grave risk of generalisation of price pressures, unanchoring of inflation expectations feeding into a loss of credibility in policy interventions. 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. We live in challenging times.”

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