The Reserve Bank of India (RBI) in its first-ever published 'Nowcast', an estimate based on high-frequency data said that the Gross Domestic Product (GDP) contracted 8.6 percent in the quarter ended September. The economy had slumped about 24 percent from April to June.
The data revealed that India's economy probably shrank for a second straight quarter, according to a team of economists including Michael Patra, the central bank's governor in-charge of monetary policy saying that it has pushed the country into an unprecedented recession.
"India has entered a technical recession in the first half of 2020-21 for the first time in its history," the authors wrote. The government is due to publish official statistics on November 27.
The Reserve Bank's number is buoyed by cost cuts at companies that boosted operating profits even as sales dipped. The team of authors also used a range of indicators from vehicle sales to flush banking liquidity to signal brightening prospects for October. If this upturn is sustained, the Indian economy will return to growth in the October-December quarter, earlier than projected by Governor Shaktikanta Das last month, when he pledged to keep monetary policy accommodative.
However, "there is a grave risk of generalization of price pressures, unanchoring of inflation expectations feeding into a loss of credibility in policy interventions," the team of economists wrote in the Reserve Bank's bulletin. They also highlighted risks to global growth from a second wave of coronavirus infections.