To the brink and back: Key business events in 2013

The RBI starting the year off with rate cuts and then reversing its stance on concerns about widening current account deficit. Fears that the US Federal Reserve will start cutting its bond purchase programme sooner than expected only added to the worries. Foreign funds pulled out of the Indian equities and debt in hoards.

FP Staff December 31, 2013 15:55:07 IST
To the brink and back: Key business events in 2013

For businesses, the year 2013 was tumultuous, with the RBI starting the year off with rate cuts and then reversing its stance on concerns about widening current account deficit. Fears that the US Federal Reserve will start cutting its bond purchase programme sooner than expected only added to the worries. Foreign funds pulled out of the Indian equities and debt in hoards. The rupee hit a record low of 68.85 against the dollar. Along with the worries, this also provided a much-needed boost for exports sector. The appointment of Raghuram Rajan as the governor of the Reserve Bank of India changed the market mood, and also the business community's sentiment, for the better. The rupee has pulled back and is holding ground despite the US Fed announcing the taper. By the end of the year, the general feel in the economy and business seems to be better. It was a V-shaped journey, so to say.

To the brink and back Key business events in 2013


Here are the key business events of the year.


The year began with US lawmakers averting a 'fiscal cliff' by voting against tax hikes and spending cuts. Though pro tem, the step was a big relief for the global markets.

Finance Minister P Chidambaram says current account deficit is "worrying". For the September 2012 quarter, the CAD expanded to a record high of 5.4 percent of the GDP thanks to falling exports. And it was only the beginning. The finance minister Chidambaram swung into action, curbing gold imports, which was identified as the key culprit. The government eventually increased the import duty on gold, from 4 percent to 6 percent and then to 10 percent.

Rating agency Fitch reiterates its "negative" outlook on the country's sovereign credit, raising concerns about slower-than-expected economic growth of 5.3 percent recorded in July-September 2012. The move forced the government to raise fuel prices and open up sectors like retail.

The government decided to delay the implementation of the controversial General Anti-Avoidance Rules (GAAR) until 2016. Relieved FIIs pumped in more dollars pushing the Sensex to 20,000 and beyond. The rupee also rose against the dollar.

Inflation slowed to its lowest rate in three years. December's WPI rose by 7.1 percent as opposed to the predicted 7.4 percent, giving rise to hopes that the RBI would cut policy rates.

India's telecom companies like Airtel and Idea raised call prices and cut promotional offers for the first time in three years, signaling end of unhealthy competition in the sector for companies and cheap call rates for customers.

RBI cuts repo rate by 25 bps to 7.75 percent and revises GDP growth forecast by 30 basis points to 5.5 percent for the year ending March 2013.


India's newest stock exchange the MCX-SX, owned by Multi Commodities Exchange of India and Financial Technologies, began trading in the second week of February. The exchange would later remain in news for all wrong reasons.

Tata Sons joins hands with AirAsia, Malaysia's low-cost carrier, and Hindustan Aviation in a 30:49:21 venture to set up a low-cost airline. The company is yet to start operations as DGCA approval is pending.

Railway Minister Pawan Kumar Bansal presented a Railway Budget in which he rightly diagnosed the financial ills of the largest employer of the country, but failed to prescribe any viable remedies.

Chidambaram presents his budget. He manages to control the fiscal deficit in the last financial year. He keeps the target for the fiscal deficit for the current year at 4.8 percent, despite sky-high government borrowing. Total expenditure rose 16 percent to Rs 16.65 lakh crore.


The RBI again cuts repo rate by a further 25 bps to 7.50 percent, but warns that "the headline for further monetary easing remains quite limited" due to an uptick in inflation, both retail and wholesale. It also raises concerns about burgeoning CAD.


The Supreme Court refuses to grant Novartis AG patent for its cancer drug Glivec. The landmark order was hailed by healthcare activists and criticized by multinational pharma companies. The company said the order "discourages future (drug) innovation in India", while Medicines Sans Frontiers said it is "the strongest possible signal to Novartis and other multinational pharmaceutical companies that they should stop seeking to attack the Indian patent law".

Reliance Jio, Reliance Industries' telecom arm that is about to launch 4G services in the country, signs a Rs 1,200 crore deal to share fibre optic network of Reliance Communications. The move was seen as a big relief for R-Comm.


The RBI cuts the repo rate by 25 bps, third time this year, to 7.25 percent, disappointing many who had hoped for a more aggressive cut. The central bank, however, warned of a possible rise in prices and termed a widening CAD as the biggest risk to the economy.

IT outsourcing company iGate fires its chief executive Phaneesh Murthy after finding him guilty for failing to disclose a relationship he had with a subordinate employee, violating company policy.

Stepping up its efforts to curb gold imports and control CAD, the RBI asks banks to stop granting loans against gold exchange-traded funds and gold mutual funds. It also orders NBFCs to refrain from issuing advances against bullion, primary gold and gold coins and from granting loans for the purchase of gold in any form.


Infosys calls back former chairman and founder N R Narayana Murthy from retirement to lead a company that performed dismally and witnessed a fall in market share. His salary is to be Re 1 per year. Speaking about his future plans at the AGM, Murthy said he would focus on taking the company back to its glory days in 3 years. The move has boosted investor confidence but resulted in many top level exits, latest being that of V Balakrishnan, who was tipped to be a contender for CEO.


RBI starts process to give bank licence. It receives 26 applications. The applicants include Aditya Birla Nuvo, Indiabulls, India Post and Reliance Capital. Tata Sons and few others later would opt out of the race. The approvals are likely to be announced in early 2014.

The government introduces the ambitious $22 billion Food Security Act after passing an executive ordinance. As per the act, as many as 82 crore people are entitled to get 5 kg of foodgrains per person a month at Rs 1-3 per kg. The country needs 62 million tonnes foodgrains a year to implement the law. A section of economists cry foul, alleging the Congress is trying to win votes at the cost of the economy. Even supporters are dismayed at the haste with which it was legislated.

Fears of an earlier than expected Fed tapering roil the markets. The RBI introduces policies to tighten the excessive liquidity in the economy. The central bank raised short-term borrowing costs, restricted funds available to banks and sold bonds.

The government again was forced to amend FDI rules for various sectors, including the telecom industry. The telecom industry FDI cap was raised to 100 percent and foreign companies would need FIPB approval only if interested in acquiring more than 49 percent in local companies. A similar provision was introduced for single brand retailers too.

The government imposed an 80:20 rule regarding gold imports which stipulates that 20 percent of all gold imported must be exported before further imports can be made. The move was aimed at curbing gold imports further.


The National Spot Exchange scam surfaces. The exchange stops futures trading and delayed by two weeks settlement of contracts claiming a fall in volumes. Promoter Jignesh Shah and his company Financial Technologies said they would not be affected in any way by the halt in trading. The incident was the tip of the iceberg in a Rs 5,600 crore securities scam that would ultimately result in Shah's resignation from the NSEL board and an order restraining FTIL from operating any exchanges in the country.

In an attempt to win the favour of major global supermarket chains, the government relaxes certain FDI retail norms. While sticking to the requirement that 30 percent of the products be sourced locally, the government yielded a bit and said the target could be achieved over five years.

The government implemented further reforms in an attempt to help the struggling economy and widening CAD. It unveils a plan to cut oil import bill by buying more oil from Iran. This would cut India's dollar requirement as the trade with Iran was not in dollars. Other plans include setting up sovereign wealth funds and steps to woo non-residents to open deposit accounts.

Targeting the yellow metal once again, the government hikes the import duty on gold to a record 10 percent. The RBI, meanwhile, bans all imports of gold coins and medallions and asks domestic consumers to pay cash.

A forgettable month for the markets, with both the rupee and the Sensex hitting confidence shattering lows. The decline was triggered by the RBI's stern capital control measures that prompted anxious foreign investors to pull out their money. The central bank's move to control how much Indians can invest abroad was seen as another factor in undermining investor confidence. The rupee touched 68.85/dollar, experiencing its biggest single day fall since October 1995, and gold hit Rs 32,500.

The August trade deficit came down to $10.9 billion thanks to flat imports and a 13 percent increase in exports, the only silver lining.


Raghuram Rajan is appointed the new RBI Governor for five years. In his firs interaction, he says there is no magic wand deal with the economic woes. But the markets will have none of it. The equity markets greet the new governor with a 4 percent rise the next day. The Sensex witnessed its biggest single-day gain since May 2009.

Taking a second measured step in creating a place in the civil aviation sector, Tata Sons and Singapore Airlines inks a 51:49 joint venture agreement to launch a full-service passenger airline with an initial combined investment of $100 million. Tata SIA Airlines Ltd is now waiting for an NOC from the civil aviation ministry.

In his first policy review, Rajan unexpectedly raises the repo rate by 25 bps to 7.50 percent, trying to tame inflation and roll back some of the liquidity tightening measures implemented by his predecessor. The RBI chief was given some space to take risks with the currency strengthening reforms thanks to the U S Federal Reserve's decision to continue with its quantitative easing stimulus programme.

The WPI hit a seven-month high of 6.46 percent due to a surge in food prices.


The RBI raises policy rate by another 25 bps, taking the repo rate up to 7.75 percent.


The traditional Muhurat trading hour at the Sensex saw the markets reach a record high of 21,321.53 points after foreign inflows swelled to $3.5 billion following the Fed's decision to hold off tapering.

Following in the footsteps of its rival Coca-Cola, beverage giant PepsiCo said it plans to invest $5.5 billion in India by 2020.


Results of elections to five state assemblies cheer the market again as investors are hopeful of a decisive victory for a BJP-led coalition in the 2014 general elections. Even the Fed tapering which starts on 1 January has not dented the extended bull-run.

India's hopes of attracting foreign multi-brand retail players finally came true as British supermarket chain Tesco announces a tie-up with Tata-Trent in a 50:50 JV.

With inputs from Reuters

Updated Date:

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