By Prof. Anand S


As economists and pundits discuss economic recovery following the severe impact of a lockdown on various industry sectors, they use the shape of some letters to project a trend. When we plot economic data on a chart, the resultant shape of the line resembles one of these letters V, K, L, or U.

A V-Shaped recovery indicates that the economy will improve for all industry sectors because of growth in production and demand. The shape of the letter shows that the slowdown will pause and the economy turns a corner. This trend is the best case for the economy.

An L-shaped recovery suggests that the economy will contract and stay at a lower plane, which is not the industry's best outcome. With persistent unemployment and stagnant economic growth, recovery can take several years.

A K-shaped recovery has two divergent lines pointing in opposite directions. This shape indicates that some industry sectors may rebound, such as technology and e-commerce, while others such as travel and hospitality fall sharply. The recovery is specific to some industry sectors.

Limited evidence points to a K-Shaped recovery, but it is too early to tell how the economy will recover. Some industry sectors have benefited from the changes caused by the lockdown while others have suffered a sharp contraction in demand.