Comprehensive News & Analysis

12-12-2020 | 15:16 PM

V-Shaped Recovery

• A V-shaped recovery is a form of economic decline and recovery that resembles the shape of alphabet V in the table.
• A V-shaped recovery includes a sharp turnaround of the economy at the previous peak following a sharp downturn.
• The latest Monthly Economic Review report by the Ministry of Finance reported that the Indian economy is undergoing a V-shaped rebound as GDP declines from 23.9 per cent in April-June to 7.5 per cent in the second quarter of 2020-21.

Key Features:

• Name "V Shaped Recovery" is taken from the form of a graph depicting a contraction and a regeneration of the economy that resembles alphabet V.
• This unique turnaround entails a deep recession in the economy, accompanied by a sharp spike in the economy.
• Such recovery is the product of the government's economic stimulus and the relaxed monetary policy adopted by the Central Bank.
• The turnaround in the V-shaped curve has boosted productivity levels and raised market demand.
• V Shaped recovery is claimed to be one of the best-case scenarios, as an economic crisis is immediately accompanied by fast recovery in core macroeconomic output parameters.

Other Shapes of Economic Recovery:

• Other types of economic recovery include Z-shaped recovery, U-shaped recovery, W-shaped recovery, L-shaped recovery, and elongated U-shaped recovery.
• The key distinction between these different shapes of economic growth is the time taken to normalise economic activity. Other considerations include the form of policy approach implemented by the Government, the effects of the pandemic on employment and household incomes.