India’s economy is likely to enter a recessionary phase for the first time ever since independence. According to a statement by Reserve Bank of India, the Indian economy has shrunk for the second straight quarter (July-September) of the current financial year, with the Gross Domestic Product (GDP) expected to contract by 8.6 percent. “India has entered a technical recession in the first half of 2020-21 for the first time in its history,” said an article by a group of economists including central bank’s deputy governor Michael Patra, in-charge of monetary policy, pushing the country into an unprecedented recession. “India has entered a technical recession in the first half of 2020-21 for the first time in its history with Q2 2020-21 likely to record the second successive quarter of GDP contraction,” as per the article titled ‘Economic Activity Index’, authored by Pankaj Kumar of the Monetary Policy Department. It, however, added that the contraction is “ebbing with gradual normalisation in activities and expected to be short-lived.” The index is constructed from 27 monthly indicators using a dynamic factor model and suggests that the economy rebounded sharply from May/June 2020 with the reopening of the economy, with industry normalising faster than contact-intensive service sectors, it said. The economic activity index can be used to gauge directional movements in GDP growth well ahead of official releases, it said. The official GDP data will be released later this month. The article said despite the raging pandemic, preliminary estimates are showing a jump in household financial savings to 21.4 percent of GDP for the June quarter, as against 7.9 percent in the June 2019 quarter and 10 percent in the immediately preceding March 2020 quarter. The estimated increase in financial savings looks consistent with other macroeconomic statistics, in particular the decline in private final consumption expenditure and the surplus position in the external current account, it said.