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The technical recession
Economy

India’s technical recession is over: an overview of the situation

17.01.2022
2 min read

What the technical recession in India is about

According to official data, India’s GDP was 0.4% last quarter. This is a good indicator, which means that the technical recession in the country has been defeated. Such a result indicates positive dynamics also in comparison with the previous period.
The beginning of the technical recession was the third quarter, when GDP was at 7.5%. This was the first time in Indian history. The economy has been in recession since the pandemic. Then in Q1 of fiscal year 2020-2021 GDP fell by nearly 24%, the worst result since 1966 for India and other Asian nations.
GDP at constant prices in Q3 FY 2020-2021 was about $499 billion. In the same period of the previous year, the figure was at $497 billion, a figure that showed growth of 0.4%.
Analyzing the processes of recovery of the Indian economy, experts raised their forecasts for the future period. They expect government spending to increase, along with demand from consumers. In addition, most sectors of the economy have already restored processes and the dynamics will only grow.
The Central Bank predicted that GDP would reach the 10.5% mark by the end of fiscal year 2020-2021. The IMF was more optimistic and talked about 11.5%.The technical recession in IndiaHowever, some analysts have raised concerns about risks to the economy. Fluctuations in the oil market, outbreaks of disease, which are still found in a number of states in India, can have a negative impact on the development of the country and slow down business activity. It should also be taken into account that industries such as air travel, tourism segment and hotel business have not fully recovered and the situation here is quite fragile.
At the same time, the Central Bank of India is increasing the volume of foreign exchange reserves. According to the latest data, the regulator is the 4th largest in the world, its reserves exceed $580 billion. Foreign currency assets reached $539.6 billion and gold reserves – $34.2 billion. Also the reserves include special drawing rights, which are estimated at $1.5 billion and the IMF reserve position at $4.9 billion.
In total, reserves increased by $689 million during the month. Reserves reached a record high of more than $590 billion in January. However, due to the decline in foreign exchange, reserves have declined slightly. According to the regulator, the reserves are extremely important for the country, they allow it to survive various external crises less painfully.
The leader in the world in terms of foreign exchange assets is China, followed by Japan and Switzerland.

Tags: Economic
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