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What is Technical recession?

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    13th Nov, 2020

Context

  • The contraction of Q2 is crucial because it implies India that has entered a “technical recession” in the first half of 2020-21— for the first time in its history.

Key information

What is a recessionary phase?

  • When the GDP contracts from one quarter to another, the economy is said to be in a recessionary phase.
  • When a recessionary phase sustains for long enough, it is called a recession.

When it said to be a recession?

  • The NBER’s Business Cycle Dating Committee typically looks at various variables such as employment, consumption etc apart from GDP growth to arrive at a decision.
  • It also looks at the “depth, diffusion, and duration” of decline in economic activity to determine whether an economy is in a recession or not.
  • According to NBER, if the situation persist for some quarter than we can call it recession.

What is a technical recession?

  • In technical terms, a recession is considered to be in progress when real GDP has declined for at least two consecutive quarters.

When it converts into depression?

  • If recession continues for years, then it is referred as “depressions”.
  • But a depression is quite rare, the last one was during the 1930s in the US.

Verifying, please be patient.

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