The monthly bulletin of RBI stated that, in November 2020, India has entered a technical recession in the first half of 2020-21, after two successive quarters of GDP contraction. The bulletin shows that India has entered a technical recession in the first half of 2020-21 for the first time in its history with Q2:2020-21 likely to record the second successive quarter of GDP contraction.
This contraction shows the gradual normalization in economic activities and is expected to be short-lived. They further stated that the reopening of the economy from May/ June 2020 has sharply rebounded, with the effect of industry normalizing faster than contact-intensive service sectors. “The index tracks GDP dynamics closely and nowcasts GDP growth at (-) 8.6 percent in the second quadrant of 2020-21.”
These highlights are from the Economic Activity Index of India. Which is measured on 27 monthly indicators using a dynamic factor model. The RBI officials are attempting to use the ‘nowcast model’ for the first time. This model is used to predict the present, the very near future, and the very recent past almost on a real-time basis using regular high-frequency data releases on activity indicators.