Reviewed by Vishnava | Updated on Sep 23, 2021


Definition of recession

  • It is a macroeconomic term that refers to a slowdown or a massive contraction in economic activities for a considerable length of time.
  • In such a scenario, economic indicators such as GDP, corporate profits, employments, etc., fall or show a downward trend.
  • It is a time of adverse demand shock and there is a drop in spending by consumers.
  • It is not triggered by a single event but a combination of factors. Some of the factors could be external trade shocks, adverse supply shocks, economic bubble, natural disasters etc.
  • It tends to last for a long period of time, till the economy recovers.
  • Recession is the anti-thesis of inflation.
  • It is a kind of economic collapse.
  • The indicators used to identify recession are – real income, employment, manufacturing, wholesale retail sales, monthly GDP estimates.

Measures Taken to Counter Recession

  • Counter cyclical fiscal measures are undertaken by the government. For instance, the government withdraws enhanced surcharge on FPIs and domestic investors in equity markets to increase investment inflows into the economy.
  • The government will also increase its fiscal spending and boost consumption sentiment to arrest downtrend.
  • The central bank of the country follows the expansionary monetary policy and increasing the money supply in the economy. Measures taken could be rate cuts, repo rate linked loans etc.

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