A technical recession is defined as a situation where an economy experiences two consecutive quarters of negative growth in GDP. This situation indicates a significant slowdown in economic activity across various sectors, affecting employment, consumer spending, and business investments.
As of 2024, notable economies such as Germany, Japan, and the UK have entered a technical recession. These developments are significant as they signal ongoing challenges in some of the world's largest economies, which can have rippling effects globally.
India is likely to experience negative repercussions due to its economic ties with these countries. The contraction may lead to reduced demand for Indian exports, fluctuations in investment flows, and overall impacts on global economic sentiments, which can influence India’s economic growth and foreign direct investment (FDI).
In light of the global economic slowdown, it is crucial for India to rely more on domestic demand to sustain its economic growth. Domestic demand encompasses consumption and investment within the country. This can help mitigate the adverse effects of decreased global demand on Indian exports and economic activities.
The FDI in India during the first half of the 2023-2024 financial year has reached a 16-year low, indicating a cautious approach from foreign investors. This trend may stem from the global economic situation and various factors that influence investor confidence in the Indian market.
Private sector investment in India has been on a downward trajectory as a proportion of GDP since 2012. Although investment has increased in absolute terms, the declining percentage relative to GDP reflects ongoing challenges in the investment climate and economic stability.
The global economic slowdown, particularly the contraction in major economies, is likely to further depress investments in India. Investors may adopt a more cautious stance, which could affect the inflow of capital into the country, especially from sources seeking to diversify away from China.
Amid these economic challenges, India's retail sector is experiencing a slowdown. Growth in discretionary retail sales has decelerated, and same-store sales growth is showing minimal increases. This slowdown reflects subdued domestic demand for consumer goods, which can further impede overall economic momentum.
Q1. What defines a technical recession?
Answer: A technical recession is defined by two consecutive quarters of negative GDP growth, indicating a significant economic slowdown across various sectors.
Q2. Which economies are currently in a technical recession?
Answer: As of 2024, Japan, the UK, and Germany have entered a technical recession, highlighting economic challenges.
Q3. How does a global economic slowdown affect India?
Answer: A global economic slowdown can reduce demand for Indian exports, impact investment flows, and ultimately influence India’s economic growth and foreign direct investment (FDI).
Q4. What is the trend of foreign direct investment in India?
Answer: FDI in India during the first half of the 2023-2024 financial year has been the lowest in 16 years, reflecting investor caution due to global economic uncertainties.
Q5. How is the retail sector performing in India?
Answer: The retail sector in India is facing a slowdown, with minimal growth in discretionary retail sales and same-store sales, indicating weakened domestic demand.
Question 1: What characterizes a technical recession?
A) Two consecutive quarters of economic growth
B) Two consecutive quarters of negative GDP growth
C) A rise in employment rates
D) Increased consumer spending
Correct Answer: B
Question 2: Which countries are currently experiencing a technical recession?
A) USA and Canada
B) Japan, UK, and Germany
C) Australia and New Zealand
D) India and China
Correct Answer: B
Question 3: Why is domestic demand important for India in 2024?
A) To increase exports
B) To reduce reliance on global markets
C) To boost foreign investment
D) To enhance international trade
Correct Answer: B
Question 4: What trend has FDI in India shown recently?
A) Significant increase
B) Stability at a high level
C) Lowest levels in 16 years
D) Consistent growth
Correct Answer: C
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