Answer:
Recession is defined as the time period when economy temporary
decline during which trade and various industrial activities are
reduced and not performing well. It is also identified by a fall of
GDP for 2 consecutive quarters.
Based on above definition of recession currently, economy of India
is going through recession.
Recent factors behind the recession is mentioned below:
- Pandemic COVID-19 : Main reason for recession
is pandemic COVID-19 because of which whole country was in lock
down for multiple weeks. Even after opening up, it's not running at
100% efficiency leading to further loss. Aggregate demand in the
market itself is getting less which is further deteriorating the
situation.
- Poor functioning of banking sector and increase in
NPA : Before COVID-19 also banking sector which is
considered core of the economy was not functioning well, it had
increase in net NPA quarter on quarter which is further increased
by Pandemic.
- Wold economy is also under recession so decrease in
demand globally : The net demand in the world economy is
also decreased, so export numbers are also decreasing adding to the
pressure of recession.
Expansionary policy is currently taken by government. Fiscal and
Monetary policy taken by government are mentioned below:
- Fiscal Policy:
- Central bank are using expansionary monetary policy to increase
the money supply in the economy.
- Central bank are also reducing the interest rate and increases
number of loans in the economy.
- Monetary Policy:
- To cope up with recession, government is decreasing indirect
tax on individuals which increases expenditure in the economy.
- Government starts spending directly as well in the form of
starting various infrastructure projects, investment schemes which
provides employment as well.
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