{"id":14340,"date":"2026-05-27T07:41:35","date_gmt":"2026-05-27T07:41:35","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/recession\/"},"modified":"2026-05-27T07:41:35","modified_gmt":"2026-05-27T07:41:35","slug":"recession","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/recession\/","title":{"rendered":"Recession"},"content":{"rendered":"

A recession<\/a> is a significant decline in economic activity across the economy lasting more than a few months, typically defined as two conse<\/a>cutive quarters of negative GDP<\/a> growth. During a recession, employment falls, business investment slows, consumer spending drops, and industrial output contracts.<\/p>\n

What Is a Recession?<\/h2>\n

The most widely used technical definition is two consecutive quarters of negative real GDP<\/a> growth. However, broader definitions consider multiple indicators:<\/p>\n

– Decline in GDP
\n– Rising unemployment
\n– Falling industrial production
\n– Reduced consumer spending and retail sales
\n– Lower business investment<\/p>\n

In the US, the National Bureau of Economic Research (NBER) formally declares recessions, often using a broader set of indicators beyond just GDP.<\/p>\n

Causes of Recessions<\/h2>\n

– **Demand shocks**: sudden fall in consumer or business spending (e.g., COVID-19 lockdowns)
\n– **Credit crunches**: banks reduce lending, choking off business investment
\n– **Asset bubble bursts**: collapse of real estate or stock market prices destroys wealth
\n– **External shocks**: oil price spikes, global pandemics, financial contagion
\n– **Excessive tightening**: overly aggressive interest rate hikes can trigger recession<\/p>\n

Recession vs Depression<\/h2>\n

– A **recession** is a mild-to-moderate economic contraction lasting months to a year
\n– A **depression** is a severe, prolonged recession (GDP falls more than 10% and recovery takes years)
\n– The Great Depression of the 1930s saw US GDP fall 27% over 4 years<\/p>\n

India and Recessions<\/h2>\n

India’s economy contracted (negative GDP growth) in Q1 FY21 during COVID-19 lockdowns, the only such contraction in recent decades. India’s economic structure (large agriculture and government sector<\/a>s, lower export dependence) has historically made it more resilient to global recessions than export-heavy economies.<\/p>\n

Key Takeaways<\/h2>\n

– A recession is two consecutive quarters of negative GDP growth, accompanied by higher unemployment and lower output
\n– Caused by demand shocks, credit crunches, asset bubble bursts, or excessive monetary tightening
\n– Governments respond with fiscal stimulus; central banks respond by cutting interest rates
\n– India experienced GDP contraction in FY21 due to COVID, but recovered quickly
\n– Recessions are a normal part of the economic cycle<\/a>; the key is the policy response and recovery speed<\/p>\n","protected":false},"excerpt":{"rendered":"

A recession is a significant decline in economic activity across the economy lasting more than a few months, typically defined as two consecutive quarters of negative GDP growth. During a recession, employment falls, business investment slows, consumer spending drops, and industrial output contracts. What Is a Recession? The most widely used technical definition is two […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-14340","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"A recession is a significant decline in economic activity across the economy lasting more than a few months, typically defined as two consecutive quarters of negative GDP growth. During a recession, employment falls, business investment slows, consumer spending drops, and industrial output contracts. What Is a Recession? The most widely used technical definition is two…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14340\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=14340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}