Technical Recession

What is Technical Recession?

  • A technical recession is a term used to describe two consecutive quarters of decline in output. In the case of a nation’s economy, the term usually refers to back-to-back contractions in real GDP. 

  • The ‘technical recession’ is mainly used by economists to capture the trend in GDP. 

    • It is most often caused by a one-off event (in this case, the COVID-19 pandemic and the lockdowns imposed to combat it) and is generally shorter in duration.


What is Recession?

  • In the U.S., the National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”. 

  • The policymakers and economists need to closely track data on unemployment, output in key sectors including industry and services (which has the largest share in India’s gross value added or GVA) and real income at the household and corporate level to ascertain how widespread and deep the contraction in economic activity is. 

  • It is important to note that recessions, when they prolong, can even lead to a depression, as happened in the U.S. — from the latter part of 1929 through to the mid 1930s — and even impacted the global economy as a whole.


Business Cycle


  • The two phases i.e. expansionary and recessionary create what is called a “business cycle” in any economy. A full business cycle could last anywhere between one year and a decade.

    • Expansionary phase: when the overall output of goods and services — typically measured by the GDP — increases from one quarter (or month) to another, the economy is said to be in an expansionary phase.

    • Recessionary phase: when the GDP contracts from one quarter to another, the economy is said to be in a recessionary phase.

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