(Sample Material) Current Events Timeline: "Economy News - January 2014 (Vol -3)"

Current Events Timeline for IAS PRE 2014

Sample Material (Economy - January 2014)

Everyone reads a newspaper and magazine, but sometimes, it becomes hard to keep a track of the different issues and development. Since the news items on different issues are found in a scattered form in the newspapers and magazines, it becomes a cumbersome process to memorize the important events, from an exam point of view.

It provides you with a timeline of the important events and developments in different spheres, from an exam perspective.

Table of Content:

Vijay Kelkar Committee

09/01/14:

  • Kelkar Committee has favoured retaining the Production Sharing Contract (PSC) system for the Oil and Gas exploration sector, because guarantees for the recovery of all input costs are important to attract major investors. Under the present system, oil companies can recover all costs from sales of oil and gas before sharing profit with the government. However, the CAG has criticised the PSC as it encourages the private partners to increase capital expenditure and delay the government's share. Kelkar Panel favours PSC for shallow and on-land blocks only, not deep-sea exploration. It also favours an open acreage regime where companies can pick exploration areas through the year, instead of periodic auctions. The Panel has proposed to constitute a National Data Repository (NDR).

FDI Policy

09/01/14:

  • FDI in Pharmaceutical Sector- The government has decided to continue with 100% FDI in pharmaceutical sector. However, to avoid the cases of acquisitions that are not in the interest of the economic availability of essential drugs, the Foreign Investment Promotion Board (FIPB) would decide the non-competent clause in special cases. The decision was taken after cases of acquisitions of Indian pharmaceutical firms by foreign companies.

10/01/14:

  • RBI relaxed FDI norms, giving foreign investors an option to exit their investments by selling their holdings of equity or debt. This is expected to bring greater FDI flow. FDI contracts can now have optionality clauses, allowing the investor to exit, subject to conditions of minimum lock-in period and without any assured returns.

30/01/2014:

  • Foreign Portfolio Investment- the government has decided that the Foreign Portfolio Investment (FPI) will attract uniform tax rate across categories. FPI include the category of- Foreign Institutional Investment (FII), their sub-accounts and Qualified Foreign Investors (QFI).

  • The new system would be beneficial for QFIs, who were subjected to higher tax rates earlier. The Central Board of Direct Taxes (CBDT) notified that the FPIs would be treated as FIIs under the Income Tax Act, 1961. SEBI has classified the FPIs into 3 classes, based on their risk profile and KYC requirements- 1. Category I FPIs are classified as low risk entities, and include foreign governments and government related foreign investments; 2. Category II FPIs cover the regulated broad based funds, regulated entities, university funds and pension funds; and 3. Category III FPIs include those not included in the first two categories.

NRI and Economy

10/01/14:

  • RBI allows NRIs relative as joint holder- banks might now include a close NRI relative as a joint holder in an individual resident's existing or new bank account on an 'either or survivor basis'. Such accounts would be considered as resident account for all purposes. But, cheques, instruments, remittances, cash, card or any other proceedings of the NRI relative will not be eligible for credit to this account.

30/01/2014:

  • Mauritius does not allow Round Tripping- Mauritius is the single biggest source of FDI in India. Mauritius has asserted that it does not encourage round tripping. The Mauritius Minister of Commerce and Consumer Protection said that 'we are open to any investigation or probe that the Indian authorities would like to initiate about the flow of the funds.

GAAR

12/01/14:

  • Dr. Parthasarthi Shome Committee on GAAR's recommendations have been generally agreed upon, but considerations on retrospective taxations are under debate, as it could send negative signals in the market. Dr. Shome said that GAAR (General Anti-Avoidance Rules) would not be used as a tax generation tool, but to prevent erosion of the tax base by avoidance.

Cabinet Committee on Economic Affairs (CCEA)

12/01/14:

  • CCEA approved setting up of a unified system at the national level- National Vehicle Security and Tracking System- and state level- City Command and Control Centre- for GPS tracking of the location of the emergency buttons in and video recording of incidents in public transport vehicles. It also approved amendments in the Mega Power Policy 2009 for provisional Mega Power projects.

GDP Growth rate

13/01/2014:

  • 2011-12- India has revised the 2011-12 GDP growth rate from 6.2 to 7%. India has been overstating the slowdown, and thus underestimating the industrial output.

27/01/2014:

  • World Bank Report- World Bank's global economic forecast gave a positive picture of Indian economy projecting it at 3.2% for 2014, and would remain at that level for two years. World Bank's positive feedback is shared by other institutions like the IMF. The report also suggested an improvement in the advanced economies.
  • However, it pointed that in the post-recession period, India and China are no longer the leaders of global growth. Rather, the leadership role has been taken over by the US and other advanced countries. World Bank expects the US to grow at a rate of 2.8% in 2014. This shows a declining significance of the BRICS grouping in the global economy.
  • Similarly, Japan has been able to overcome the economic slowdown, thanks to the aggressive monetary and fiscal policy of Shinzo Abe.
  • By 2016, the Indian economy is expected to grow at a rate of 7.1%. Also the gap between the growth rate of India and China is expected to narrow down.

01/02/14:

  • The government updated the growth rate for 2012-13 at 4.5%, compared to the earlier estimates of 5%, on account of subdued performance by Agriculture, mining and manufacturing. Growth in year 2012-13 is the lowest in the decade. The primary sector grew only by 1%, as against the earlier data of 1.6%. The Secondary sector grew by 1.2%, as against earlier data of 2.3%. Thus, the main factor of growth has been the tertiary and service sector.

  • However, GDP growth rate for 2011-12 has been revised up to 6.7% from 6.2%.

08/02/14:

  • The Central Statistical Organization (CSO) released the estimates for 2013-14 GDP growth at 4.9%. The figures for 2012-13 stand at 4.5%, which is the lowest for the decade. The recovery in the growth rate has come mainly because of the agriculture, forestry and fishery sector.

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