RBI Governor says it is not K, V, U, L, or W but three-speed recovery: What does all these letters mean?

RBI Governor says it is not K, V, U, L, or W but three-speed recovery: What does all these letters mean?

FPJ Web DeskUpdated: Friday, October 09, 2020, 04:28 PM IST
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RBI Governor Shaktikanta Das | File Picture

During the monetary policy announcement, Shaktikanta Das, RBI Governor, stated that rather than discussing K, V, U, L, or W shaped recovery, the focus should be on speed of recovery.

Das said, “In my view, it is likely to predominantly be a three-speed recovery, with individual sectors showing varying paces, depending on sector-specific realities. Sectors that would ‘open their accounts’ the earliest are expected to be those that have shown resilience in the face of the pandemic and are also labour-intensive.”

Agriculture and allied activities; fast-moving consumer goods; two-wheelers, passenger vehicles and tractors; drugs and pharmaceuticals; and electricity generation, especially renewables, are some of the sectors in this category.

Know what is K, L, U, V, or W recovery:

K-shaped recovery: Some sectors in an economy will revive faster compared to others. There will be vast differences in the rate and time of this growth. This recovery is usually seen in the case of a recession. In this recovery, the wealthy recover and the lower-income group is pushed towards poverty. Such recoveries lead to changes in the structure of the economy or society at large. Thus, the RBI governor distanced itself from the talks of K-shaped recovery.

L-shaped recovery: This recovery is the worst. In this scenario, the growth drops remain low and fail to take off for a long period of time. This is usually due to a recession that might have hit the economy. This could lead to economic depression. In this scenario, at times there are even de-growth.

V-shaped recovery: The classic recovery is a V-shaped recovery. There is a sudden shock and there is a fall and it bounces back. This recovery is expected in the Indian economy mainly after India recorded a contraction of 23.9 per cent in the April-June quarter. With all the recovery measures adopted by the government and various institutions, this is a hope of a V-shaped recovery. The graph in the case of this recovery is V-shaped.

U-shaped recovery: According to Centrum Institutional Research, India's economic recovery is more likely to be a ‘U’ or 'W' shaped rather than 'V'. The report also stated it was earlier estimated that some advanced economies including India will see a V-shaped recovery but it may not be the case now. This recovery is more like an economy that is hit with a recession. In this recovery, GDP declines, there is unemployment and many other indicators, before it recovers.

W-shaped recovery: The graph of the recovery is ‘W’ shaped. In this recovery, the economy recovers from the recession and then immediately goes into recession. This form of recession-recovery-recession is cyclical in nature. This form of recovery can be a painful one as it is like a bumpy ride for an investor.

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