What is Technical Recession?

The National Statistical Office (NSO) has released the economic data for the July to September quarter. The data by NSO has confirmed that India was in the midst of a technical recession because of the COVID-19 pandemic outbreak.

What NSO data confirms?

• As per the NSO data, Indian economy was contracted by 7.5 percent in the last quarter.
• Earlier then the last quarter, the economy was contraction by 23.9 percent.
• NSO data further states that, this latest contraction has taken place, despite there is lifting of restrictions on commercial and economic activities  by the central government.
• The data implies that, India has entered into “technical recession” for the first time in first quarter of 2020-2021.

What is a technical recession?

• Technical recession is a situation where recession is considered to be in progress when real GDP has declined for two consecutive quarters at least.
• The technical recession is different from the recession in a way that, “recession” is the significant contraction in economic activity.
• The situation of data is clear from the perspective of empirical data analysis  But it does not answer many of the queries such as – is quarterly GDP enough to determine economic activity or unemployment or personal consumption needs to be considered as well?

Recession

Recession is a situation when the recessionary phase continue for an inordinate time. If the GDP continues to contract for a sustained period, the economy considered to be fallen into a recession. However, there is one limitation of the recession. Different economists uses different definitions of  recession. Some may use only the GDP to determine the situation of recession while, others may use manufacturing output, consumption or employment so as to provide a robust assessment of the economy. This is because, there is a possibility for GDP to grow but unemployment to rise along with it.