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RBI Published 1st ever ‘nowcast’; India is in 1st historic technical recession

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India in historic technical recession, RBI 'nowcast' showsIn accordance with the Reserve Bank of India’s (RBI) first ever estimation based on high-frequency data namely “nowcast”, India’s Gross domestic product (GDP) contracted 8.6% in the quarter ended September 2020 i.e. Q2FY21. Nowcast is prepared by a team of economists including Michael Debabrata Patra, RBI’s deputy governor.

  • As per it, India also has entered a technical recession in the first half of FY21 for the first time in its history as the economy had slumped about 24% in Q1FY21 due to the COVID-19 pandemic.
  • A recession is a period of declining economic performance that lasts for several months. It is defined as two successive quarters of decline.
  • The government will publish official statistics on November 27, 2020.

Key Points:

–Preliminary estimates show an increase in household financial savings to 21.4 % of GDP in Q1: 2020-21 from 7.9% in Q1 and 10.0% in Q4: 2019-20.

–The team of authors used cost cuts at companies that boosted operating profits even at low sales and range of indicators from vehicle sales.

–They also highlighted risks to global growth from a second wave of coronavirus infections.

–Retail inflation rises to 7.61% in October from 7.27% in September, 2020

In accordance with the government data, the Consumer Price Index (CPI) rises to 7.61% in October 2020 as compared to 7.27% in the previous month of September, 2020. It was 4.62 % in October 2019. On the other hand, Consumer Food Price Index (CFPI) rose to 11.07% in October, 2020 up from 10.68 % in September, 2020.

  • The rise in general inflation was mainly on account of elevated food prices due to disruption from the COVID-19 and excessive rainfall in states such as Maharashtra, Karnataka and Andhra Pradesh (AP) which have damaged and delayed the harvesting of onions and other vegetables.

Recent Related News:

  • On September 29, 2020, the Reserve Bank of India (RBI) deferred implementation of provisions made under Basel III capital due to uncertainty related to Covid crisis. In this regard, RBI will repel the final tranche of the capital conservation buffer (CCB) and the implementation of net stable funding ratio (NSFR) by six months i.e. April 1, 2021.
  • RBI also extended the enhanced borrowing facility provided to banks under the marginal standing facility (MSF) scheme by six months till March 31, 2021. It was initially available up to June 30, 2020 and was later extended up to September 30, 2020 due to economic disruptions amid COVID-19.

About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, and M Rajeswar Rao)