India likely entered into a technical recession for the first time in its history at the end of the first half of 2020-21, according to the Reserve Bank of India (RBI).
The RBI showed in its first-ever published 'nowcast' that India's Gross Domestic Product (GDP) contracted 8.6% in the July-September quarter.
In the April-June quarter, the economy had slumped about 24%.
"India is likely to have entered a technical recession in the first half of 2020-21 for the first time in its history with two successive quarters of GDP contraction," the authors wrote in 'nowcast'—the prediction of the present or the very near future of the state of the economy.
The government is expected to publish the official statistics on November 27, Bloomberg reported.
Reportedly, the RBI's figure is buoyed by cost cuts at companies, which resulted in greater operating profits even as sales declined.
The nowcast also signaled brightening prospects for October. If the trend continues, the Indian economy is set to return to growth in the quarter ending December, ahead of the RBI Governor Shaktikanta Das's prediction last month.
In the RBI bulletin, the authors cautioned "there is a grave risk of generalization of price pressures, unanchoring of inflation expectations feeding into a loss of credibility in policy interventions."
They highlighted the risks to global growth from the second wave of COVID-19 and the stress intensifying among households/corporations "that has been delayed but not mitigated."
"We live in challenging times," they wrote.
As millions lost their jobs, consumers restrained themselves from spending money, choosing to hold onto their cash.
Early estimates in the bulletin suggest that household financial savings jumped to 21.4% of GDP in the April-June quarter, up from 7.9% in the same period a year ago and 10% in the January-March quarter in the current fiscal. Most of these savings are bank deposits.
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