Q5(b). Economic Recession and its impact on Indian Economy

“Recession hits the poor the hardest.” - World Bank Global Economic Prospects

A recession refers to a prolonged downturn in economic activity marked by falling GDP, declining industrial output, rising unemployment, and low consumer confidence. India experienced strong recessionary pressure during the 2008 financial crisis and the 2020 COVID-led economic contraction.

Impact on India

1. GDP Decline: India’s GDP shrank by –6.6% in 2020–21 (NSO), the sharpest contraction since Independence.
2. Job Losses: CMIE data shows unemployment peaked at 24%. Migrant labourers faced acute distress, prompting government relief.
3. Fall in Investment: Private investment suffered due to reduced demand; bank credit growth slowed and NPAs increased, especially in MSMEs.
4. Inflation & Supply Chain Disruptions: Fuel and food inflation rose due to global supply chain shocks. The RBI had to raise interest rates to control inflation.
5. Poverty Increase: World Bank estimates millions fell into temporary poverty during 2020. Welfare schemes absorbed the shock.
6. Government Response
   • PM Garib Kalyan Anna Yojana
   • Atmanirbhar Bharat stimulus packages
   • MGNREGA wage increase
   • RBI liquidity measures (LTRO, repo rate cuts)

Haryana gave direct cash assistance to construction workers, expanded PDS distribution and strengthened procurement, protecting farmers during recession.

Recession weakens growth, employment and welfare, making resilient safety nets essential.