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In: Economics

Data about Business Cycles in india- is the economy going through booms, recessions etc? How do...

Data about Business Cycles in india- is the economy going through booms, recessions etc? How do we know? What are the recent factors behind this? What kind of fiscal and monetary policies is this country presently following? Expansionary or contractionary?

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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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