The wish list, when it finally reached him on the afternoon of February 1, did not take India's Finance Minister P. Chidambaram by surprise. Finance ministers are accustomed to receiving such lists in the run-up to the last day of February, when the Union Budget, a statement of the government's accounts and a document announcing its economic policies, is presented. This wish list came from the communist parties that, with their 63 members, support the ruling United Progressive Alliance (UPA) government from without.

Newspapers and television channels had somehow got wind of the list, down to the last detail, a day earlier, so, chances are, Chidambaram knew the exact nature of the demands well before meeting with the leaders of the Communist Party of India (Marxist), Communist Party of India, Revolutionary Socialist Party, and Forward Bloc.

Thus far, the reform-minded fm has had his way. He has managed to convince, cajole or ignore the communists. When all else has failed, his equally reform-minded boss, India's Prime Minister, Manmohan Singh has stepped in. Why, the UPA has even been willing to barter sops for reforms, agreeing to raise the interest rate on employees provident fund (EPF) from 8.5 per cent to 9.5 per cent in return for being allowed to raise the ceiling on foreign direct investment (FDI) in the telecommunications sector from 49 per cent to 74 per cent.

Some of the demands are grounded in original logic-did you, constant reader, know that deficit financing is a better way to fund social sector initiatives than using funds from the divestment of the government's stake in profitable public sector companies because the former involves "interest payments by the government in the future against a one-time borrowing", while the latter does trading off "future streams of income from dividends against a one-time receipt from the sale"-but Chidambaram may still be unable to brush them off; there's no telling how the communists, having made their stand clear, will react if things do not go their way. The communists, meanwhile, are caught in a trap of their own making: their repeated capitulation over the past few months, largely driven by their desire to keep the Congress' traditional rival, the Bharatiya Janata Party out of power, has caused the world to see them as paper tigers. The question is, should Chidambaram ignore their demands, will they roar?

-Ashish Gupta

RIP
Qualis. 2000-2005

It seems only apt that Qualis, a box-on-wheels introduced by Toyota Kirloskar Motor Limited in India in January 2000-the company's first offering in the Indian market, it was influenced by Kijang, a similar vehicle parent Toyota sold in Indonesia-should go out on a high. In December, TKML sold 4,092 units of Qualis, the highest in any month. All told, the company sold 140,000 units of the multi-utility vehicle (MUV) before deciding that the market was ready for an upgrade, Innova, coincidentally, a larger, more competitively priced, better looking car the parent sells in Indonesia. In five years, Qualis became the preferred car of suburbanites with large families (including pets in some cases), US-returned techies who preferred its understatedness to the flashiness of an SUV, and taxi operators attached to call centres (their disregard for human lives, within and without the vehicle, has given birth to the term Killer Qualis). And it helped TKML understand the Indian car market. Not surprisingly, the buzz is that TKML is considering the launch of Toyota subsidiary Daihatsu's Mira, a small car. The box has done its job.

-Venkatesha Babu

SECOND
The 74 Per Cent Solution
The government finally allows 74 per cent FDI in telecommunications. It is all it was made out to be, and more.

On February 1, the government decided to raise the ceiling on foreign direct investment (FDI) in telecommunications from 49 per cent to 74 per cent. On the same day, private equity firm Warburg Pincus sold a 3.2 per cent stake in Bharti Tele-Ventures for $306 million (Rs 1,346.4 crore). It is unlikely the two events are related (although one can never tell with such things), but both have a bearing on the Indian telecom market. The first tells the world that there are investing opportunities in the Indian telecom business. The second shows the world that profitable exits are possible in it. The government's (this one and last's) we-will-we-will-we-will approach to increasing the ceiling on FDI in telecom to 74 per cent was accompanied by a rash of hype from those who supported the move on its benefits-ultimately, the lofty one of helping India's teledensity rise by making the big-ticket investments required-and an equal volume of hysteria about its ills (mostly misplaced). The truth is, the 74 per cent thingamajig is all it was hyped to be, and more. "Increased foreign capital will provide the Indian telecom industry the much-needed impetus to deliver on the ambitious target of reaching between 200 million and 250 million subscribers over the next three years," says Rajan Bharti Mittal, Joint Managing Director, Bharti Tele-Ventures.

The biggest beneficiaries are companies where foreign investors are looking to increase their stake: Bharti Tele-Ventures (foreign investors hold a 47.84 per cent stake in it), Hutch (42.34 per cent), and Idea Cellular. Singapore Technologies Telemedia and tm International are already contemplating buying more shares in Idea Cellular in which they hold a 47 per cent stake. This also means the Tata Group, which is betting on CDMA (Tata Indicom), can get a better price for its 24.7 per cent stake in Idea (a GSM player) when it chooses to exit. Aircel-Russian conglomerate Sistema and Idea are in the fray for this company-which operates in Chennai and Tamil Nadu, is already in sell-out mode. Significantly, the raising of the FDI ceiling comes at a time when the government has allowed intracircle mergers (a telco operating in a certain area is free to acquire another operating in the same area). And it will, says Kobita Desai, Principal Analyst, Telecom, Gartner India, help create an environment conducive to growth and consolidation. Indeed, the industry is thrilled enough for T.V. Ramachandran, Director General, Cellular Operators Association of India, to dismiss the government's rider about all senior executives of telcos being Indian citizens as a non-issue. This writer wonders whether a foreign telco with a 74 per cent stake in an Indian one would feel the same way.

-Sahad P.V.

Cell Comix
Mythology comes to the mobile.

If you can have an image of Christina Aguilera as the wallpaper on your mobile phone's screen, there is no reason you won't want to have one of Krishna on it. That seems to be the reasoning behind India Book House's (IBH) decision to create mobile content from its best-selling Amar Chitra Katha (ACK) and Tinkle lines. Starting in 1970 with a title on Krishna, ACK has, for 35 years and through 436 titles, done more for the cause of Indian mythology and history than the prevailing school curriculum. Now, India Book House is hoping to cash in on the popularity of these comics (the company has sold over 86 million of them to date) and the prevalence of mobile phones by launching wallpapers based on ACK issues initially, and then full-fledged mobile comics that can be downloaded in instalments. Saumitra Srivastava, Chief Marketing Officer, IBH, is convinced that Indian consumers would want both and believes going mobile is one way to combat the declining popularity of comics. "We are the pioneers in the comics business," he adds, "and we want to continue this trend of being pioneers." The company hopes to arrive at a revenue-sharing arrangement with telcos (the typical way these things work) and is talking to several. Birbal the wise, anyone?.

-Priyanka Sangani

RBI vs PW
Is the audit firm the victim or the crime?

RBI's V.Y. Reddy: They are to blame

On September 30, 2003, Pricewaterhouse & Co., an audit firm that is a part of the international PricewaterhouseCoopers (PWC) family, finalised its audit report of Global Trust Bank. The firm signed off, but not before making several observations (qualifications in accounting lingo). These had to do with the way the bank had used its statutory reserves to make additional provisions for non-performing assets.

On the same day, India's central bank, Reserve Bank of India, issued a press release that said: "The just announced audited results for 2002-03 indicate that the present management has made special efforts in recovery of non-performing assets...."

The two events, dated almost a year and a half ago, are important because of other events that followed: In July 2004, RBI wrote to the CEOs of banks asking them not to use the services of PW and Lovelock & Lewes (L&L, earlier auditors of GTB, and again, part of the PWC family). It also asked the Institute of Chartered Accountants of India (ICAI) to investigate the failure of the two firms to "detect a hole in GTB's balance sheet".

The letters followed RBI's decision to enforce a moratorium on deposits in GTB and the bank's consequent merger (championed by RBI) with Oriental Bank of Commerce. And not too long back, in December 2004, RBI wrote to the heads of non-banking finance companies (NBFCs) asking them to avoid the two firms. ICAI's new President K.S. Vikramsey says the institute has "initiated proceedings against the erring firms" and that he is "waiting for some papers from RBI".

Meanwhile, all one executive at PWC will say is that "there can be nothing more revealing than the auditor's report", adding that three directors on the board of GTB resigned soon after the two audit firms published their report. The between-the-lines-message: we didn't mess up, the central bank did..

-Ashish Gupta