Will a recession hit India this June, as Union Minister Narayan Rane appears to be predicting?

So, is India heading for a recession?

The short answer is no.

Technically a recession means that the total output in the economy — measured by the Gross Domestic Product or GDP — contracts for two consecutive quarters. A quarter is a period of three months. So essentially, for India to hit a recession after June would require the GDP during January to March quarter as well as the GDP in the April to June quarter this year to contract over the same two quarters in 2022.

In other words, India should have produced less output as a country in the first 6 months of 2023 when compared to the first six months of 2022.

As things stand in January, this is near impossibility.

While it is true that India economic momentum is slowing — going by the First Advance Estimates of GDP for the current financial year that ends in March, the GDP is likely to grow at just about 4% in the January to March quarter — a recession is largely ruled out because the GDP is expected to continue to grow at around 7% (according to the latest RBI projections).

In other words, far from contraction, India’s economy is likely to grow, albeit at a slightly muted rate right through 2023 and 2024.

Why did Narayan Rane say that recession will hit India?

It is important in this context to note what Rane said.

“As I am in the Cabinet, some information is available to us and whatever advice we get from PM Modiji, on that basis, we can say that there is an economic recession in big countries. It is a reality,” news agency PTI quoted the minister as saying.

“To ensure India is not impacted or to stop (the economic slowdown), which is expected to come after June… Modiji and the Centre are making efforts to ensure the people of the country are not impacted by the slowdown,” Rane added.

“The growth of India is on the right path and it was 10th in economic status in the world and has improved now and the aim is to be in fifth position by 2030,” he said.

In other words, Rane was essentially talking about recession hitting the global economy — especially some of the biggest ones such as the US and European Union countries. It is more likely that Rane perhaps meant that the effect of that recession will hit India by June. It is a fact that India’s economic growth will be dragged down by the global recession.

In a recent note, CRISIL research said: “Over the past two decades, India’s growth cycles have got increasingly synchronised with that of advanced economies since the 2000s due to enhanced integration of trade and capital flows.”

Given this past trend, the expected slowdown of GDP growth in the US from 1.8% in 2022 to a contraction of 0.1% in 2023, and from 3.3% to essentially zero growth in the European Union, does not portend well for India.

Lastly it is important to remember, as many leading economists point out, that in a country such as India which needs to grow at close to 10% each year to create jobs for its youthful population and pull millions out of poverty, a 4%-5% GDP growth rate can “feel” like a recession.