Indian central financial institution information level to first ever recession | India Information
Figures from the Reserve Bank of India suggest the economy contracted 8.6 percent in the July-September quarter after falling over the past three months.
India’s economy likely contracted for a second straight quarter, according to a team of economists including Michael Patra, the central bank’s deputy governor for monetary policy, pushing the country into an unprecedented recession.
Gross domestic product declined 8.6% in the quarter to September, the Reserve Bank of India showed in its first published “Nowcast,” which is an estimate based on radio frequency data. The economy collapsed by around 24% from April to June.
“India entered a technical recession for the first time in its history in the first half of 2020-21,” the authors wrote. The government is expected to release official statistics on November 27th. The median forecast in a Bloomberg poll of economists predicts a 10.4% decline in the July-September quarter.
[Bloomberg]The number of reserve banks is supported by cost reductions at companies that increased operating profit despite falling sales. The writing team also used a range of indicators, from vehicle sales to bank liquidity flushing, to signal a brightening outlook for October. If this upswing continues, the Indian economy will return to growth in the October-December quarter, earlier than Governor Shaktikanta Das forecast last month when he promised to keep monetary policy accommodative.
“However, there is a serious risk of price pressures generalizing and inflation expectations unbundling, leading to a loss of credibility in policy interventions,” the economists wrote in the Reserve Bank’s bulletin. They also pointed out the risks to global growth from a second wave of coronavirus infections.
“Lurking around the corner is the third major risk – the worsening, but not diminishing, stress in households and businesses that could affect the financial sector,” the economists concluded. “We live in challenging times.”
Consumers have cut their spending as millions have lost their jobs and preferred to throw away cash. Preliminary estimates in the central bank bulletin showed household financial savings to rise to 21.4% of GDP from April to June, compared to 7.9% for the same period last year and 10% from January to March. The bulk of these savings are bank deposits.
“The trend towards higher than usual household financial savings may continue for some time before the pandemic subsides and consumption levels normalize,” wrote Sanjay Kumar Hansda, Anupam Prakash and Anand Prakash Ekka of the RBI, adding that this could decrease as the virus curve flattens and economic activity picks up.