Recessionary phase:

At its simplest, in any economy, a recessionary phase is the counterpart of an expansionary phase.

When the overall output of goods and services — typically measured by the GDP — increases from one quarter (or month) to another, the economy is said to be in an expansionary phase. And when the GDP contracts from one quarter to another, the economy is said to be in a recessionary phase.

Together, these two phases create what is called a “business cycle” in any economy.

A full business cycle could last anywhere between one year and a decade.

The line graph accompanying this article maps India’s quarterly real GDP growth since 1951. As one can see, this line goes up and down. The peaks and troughs show the different expansionary and recessionary phases of the economy.

As the graph shows, there have been several expansionary and recessionary phases in India’s history.

A recession:

According to NBER, “During a recession, a significant decline in economic activity spreads across the economy and can last from a few months to more than a year”.

What is a technical recession?

While the basic idea behind the term “recession” — significant contraction in economic activity — is clear, from the perspective of empirical data analysis, there are too many unanswered queries.

Unanswered queries:

For instance, would quarterly GDP be enough to determine economic activity? Or should one look at unemployment or personal consumption as well? It is entirely possible that GDP starts growing after a while but unemployment levels do not fall adequately.

Typically, recessions last for a few quarters. If they continue for years, they are referred to as “depressions”. But a depression is quite rare; the last one was during the 1930s in the US.

In the current scenario, the key determinant for any economy to come out of recession is to control the spread of Covid-19.

Source : ” Indian Express ”.