(Current Affairs) Economy & Energy | November : 2013


Economic Outlook 2013-14 Released

The Economic Advisory Council to the Prime Minister (of India) on 13 September 2013 released the document Economic Outlook 2013-14 in New Delhi. The economic growth forecast of India for the current fiscal 2013-14 was lowered to 5.3 percent from 6.4 percent projected earlier. The PMEAC had in April 2013 projected 6.4 percent growth for Indian economy for current financial year. RBI too had earlier lowered its growth
projection for this fiscal to 5.5 percent from 5.7 percent. The Economic Outlook condition listed out host of measures including further liberalisation of FDI norms to improve economy.

The other major highlights of Economic Outlook India are as following:

  • The PMEAC expects the agriculture sector to grow by 4.8 percent in the current fiscal up from 1.9 percent, while the industrial growth has been pegged at 2.7 percent as against 2.1 percent in 2012-13.
  • The growth of services sector, however, is projected to decelerate to 6.6 percent in current fiscal from 7.1 percent a year ago.
  • In order to promote growth, the advisory council suggested that the government should liberalise FDI investment norms, resolve tax concerns of the industry, fast track public sector investment and initiate measures to contain fiscal deficit.
  • Referring to the external sector, the advisory council expressed hope that the Current Account Deficit (CAD) in 2013-14 will come down to 70 billion US dollars or 3.8 percent of GDP, from 88.2 billion US dollars or 4.8 percent a year ago.
  • As regards rupee, it was hoped at the current level it is well corrected. Stability is returning to the foreign exchange market. As capital flows return and as CAD begins to fall, this tendency will strengthen.

  • Admitting that rupee depreciation will put some pressure on inflation, the advisory council stated that On balance, WPI inflation by end March 2014 will be around 5.5 percent as against the average of 7.4percent in 2012-13 and 5.7 percent for March end 2013. The wholesale and retail inflation widened in recent months primarily on account of higher weightage of food items in CPI. The retail inflation in August 2013 stood at 9.52 percent, while the WPI numbers in July was at 5.79 percent.

  • The trade deficit, PMEAC said, would come down to around 185 billion US dollars in 2013- 14, against an estimated 195.7 billion US dollars in 2012-13.

  • Between 2010-11 and 2012-13, the combined impact of higher net oil and net gold imports on the CAD (Current Account Deficit) was almost 57 billion US dollars or 3 percent of GDP.

  • The CAD may go even below 70 billion US dollars in 2013- 14 if the recent trends in exports and imports are maintained through the year.

  • Net Capital flows are projected to fall to 61.4 billion US dollars in 2013-14 against an estimated 89.4 billion US dollars in 2012- 13 putting pressure on the country’s forex reserves.

FMC’s Administrative Control shifted to Finance Ministry

The administrative control of Forward Markets Commission (FMC), the chief regulator of Forwards and Futures Commodity Markets in India on 9 September 2013 was transferred to Ministry of Finance following the
orders of Government of India. Earlier, the FMC was under the control of the Department of Consumer Affairs under the Ministry of Food. With this decision, the regulators of financial sector like SEBI, RBI, IRDA and PFRDA, all have been brought under one roof and that is Ministry of Finance. The Government notified its decision to bring the commodity markets regulator Forward Markets Commission (FMC) under the ambit of the Finance Ministry on 6 September 2013. The proposal to this effect was moved in August 2013 in the wake of the alleged scam in the National Spot Exchange Limited (NSEL) of 5600 crore rupees. NSEL stopped its
functioning in the month of August 2013 following the Governments orders which were issued in the wake of violation of certain rules.

About Forward Markets Commission (FMC)

Forward Markets Commission (FMC) headquartered at Mumbai, is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952. It is a regulatory authority which was overseen by the Ministry
of Consumer Affairs, Food and Public Distribution, Govt. of India. Recently, with the decision of Government of India the administrative control of FMC was shifted to Union Finance Ministry. FMC under its ambit regulated futures trading on 21 commodity bourses that includes MCX and NCDEX.


The Government’s decision on FMC would help in increasing the coordination between the market regulators. It will also be helpful for the government in resolving the NSEL payment crisis of 5600 crore rupees.

Government notified GAAR

The Union government of India on 26 September 2013 notified GAAR (General Anti Avoidance Rules). It seeks to check tax avoidance by investors routing their funds through tax havens. It will come into effect from 1 April 2016. The GAAR will apply to entities availing tax benefit of at least 3 crore rupees. It will apply to foreign institutional investors, FIIs that have claimed benefits under any Double Tax Avoidance Agreement (DTAA)Investments made by a non-resident by way of offshore derivative instruments or P-Notes through FIIs, will not be covered by the GAAR provisions. The notification said, investments made before 30 August 2010, will not be scrutinised under GAAR.

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