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Economy
Politics has overtaken economics and with the General Election less than six months away, business is in a wait-and-watch mode. Initially, the wait was for the economy to revive, investment scenario to improve and consumers to start spending again. When recovery remained subdued, the wait was for 2014 to arrive. In the beginning of the year, 2013 was expected to herald a sharp recovery in the economy. However, given the manifold problems — from inflation, high current account deficit, high fiscal deficit and low investments, the economy is taking its time to revive. The financial year 2013, which ended in March, was a disaster with several growth parameters at decadal lows. The GDP growth rate was at 5 per cent, the lowest in a decade. Industrial output grew at 1 per cent, down from 2.9 per cent in 2011-12, the worst showing by industry in 20 years. With the effect of several government reforms trickling down from FDI liberalisation, project clearances, curbing current account deficit, clamping down on the fiscal deficit, there has been a gradual but slow recovery in the second half in GDP numbers, industrial growth and current account deficit, with the curb on gold imports. With the economy being subdued now for a couple of years, companies have been in firefighting mode — battling with stretched balancesheets, eroding profitability, muted demand, huge debt obligations and scarce fund raising. With high inflation hurting household budgets, spending slowed down as jobs and incomes showed little improvement. The fall in the rupee mirrored the story of the economy. At one stage in August it was hovering at 69 to the dollar, after the US Federal Reserve first hinted at tapering of its monetary stimulus which has kept many world economies afloat. The rupee recovered after the tapering got postponed, the government took some steps to rein in imports and the new RBI Governor Raghuram Rajan’s measures seemed to calm the market. Gold almost became an undesirable commodity with the curb on imports but not before a massive rush for it following its sharp fall in prices had broken all records of consumption. The Sensex was the exception in an otherwise challenged year as it continued to scale new highs due to the global liquidity, reform measures, FII investment and towards the end of the year excitement over Narendra Modi as BJP’s PM candidate. The big transition in corporate India after the retirement of Ratan Tata was the appointment of Cyrus P. Mistry as chairman of the Tata group. The comeback of the year was N R Narayana Murthy’s return to Infosys to revive the IT company, which was suffering indifferent performance. The coal block allocation singed several business houses, including Kumarmangalam Birla, which saw a furore from the corporate world and Naveen Jindal. The spat of the year was seen in Ranbaxy where the new owners, Japanese giant, Daiichi alleged that the erstwhile owners Malvinder and Shivinder Singh had withheld information on its problems with the US drug regulator. Chit-fund schemes were mired in uncertainty after the Sharda chit-fund scam in Kolkata lead to a nationwide hunt for the owner. Real estate transactions of DLF with Robert Vadra were the subject of sensational allegations. General Motors sacked several top executives as more than 1 lakh Tavera vehicles had to be recalled due to emission problems and the government ordered a probe in the matter. The policy of FDI in retail drew no investments but Bharti and Walmart parted ways. There were allegations of lobbying and violation of FDI norms. Nokia, as the dominant handset brand, gave way and was acquired by Microsoft. Its Indian unit remains mired in tax problems. The Sahara group’s problems with SEBI over repayment to investors continued to hog headlines. The National Spot Exchange saw a virtual collapse with a payments crisis which saw the exit of its promoter, Jignesh Shah, from commodity exchange MCX and several arrests being made, including that of Bollywood producer of Satya 2. Phaneesh Murthy was sacked as CEO of iGate over sexual misconduct charges. Earlier he had to leave Infosys on similar grounds. The new Companies Bill was passed which has a strong emphasis on corporates mandatory spending on social responsibility schemes and ventures. The first FDI investment in multi-brand retail has come in through Tesco. The Fed tapering has also started. As the year draws to a close, the waiting game will continue for business till the General Election.
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