The term technical recession refers to two consecutive quarters of decline in output. So, an economy is said to be in technical recession, when there are successive contractions (or back-to-back contractions) in its real GDP. Technical recession is basically used to capture the trend in GDP as it is mostly caused by a one-off event, which is generally of short duration (like COVID-19 pandemic and the subsequent lockdowns). If a recession lasts for a few quarters or for years, such as during the 1930s in the US, it is termed ‘depression’. However, it is quite rare.
On the other hand, ‘recession’ is a broader concept that includes many economic variables—employment, household, corporate income, and sales at businesses—to show decline in economic activity.
Indian Scenario
As per the first advanced estimates (FAE) released by the Ministry of Statistics and Programme Implementation for the financial year 2020-21, India’s overall real GDP will contract by 7.7 per cent in 2020-21.
The main reason for this contraction has been the COVID-induced lockdown. Due to disruption caused by it, the economy contracted by about 24 per cent in the first quarter of 2020-21, i.e., April, May, and June. During the first half of the year 2020-21 or the first two quarters (from April to September), the economy saw a contraction of 15.7 per cent. As the contraction in GDP stretched to two consecutive quarters from April to June and from July to September, the Indian economy entered a technical recession in the first half of 2020-21.