f o r    m a n a g i n g    t o m o r r o w
MARCH 11, 2007
 Cover Story
 BT Special
 Back of the Book

The centre is looking at removing the distinction between FDI and FII investments. This will impact sectors like asset reconstruction, real estate and aviation, where separate ceilings apply to FDI and FII investment. However, allowing FDI through the FII route in the realty sector could result in prices shooting through the roof. The Asian financial crisis of the '90s is still fresh in mind, and a method should be devised to moderate possible volatility in key sectors.

S&P And After
For the first time in 14 years, international credit rating agency, Standard and Poor's (S&P), has raised India's credit rating to investment grade. S&P is the last of the three major international rating agencies to do so. Moody's Investors Service did it in January 2004 and Fitch Ratings in August 2006. The upgrade is likely to spur the flow of foreign investment into power, steel and other industries, which receive less than a tenth of the funds going China's way.
More Net Specials

Business Today,  February 25, 2007

Gmail is Now Open to Everyone
Users of Google's web-based e-mail service Gmail will swear by it. Despite its invitation-only status, it became a de facto standard for private e-mail addresses across the world. Even though it was Sabeer Bhatia's Hotmail that started the concept of free web-based e-mail, the engineers at Google realised that with greater bandwidth and heavier file sizes, people wanted more storage; so on April Fool's Day in 2004, they launched Gmail with 1 gigabyte of storage and on the same day next year, they doubled capacity; today, Gmail's storage capacity stands at over 2.75 gigabytes.

Gmail has worked very effectively for Google despite it almost donating away massive amounts of storage space (few users, however, use more than a quarter of their storage) because Google has been able to weave its revenue generating AdWords contextual advertising into Gmail.

Tension Growing Within Left
The Election Effect
It's now BRIC vs BRIC
UBS Eyes Larger Role in India

Other free e-mail providers (such as Yahoo! and Hotmail) have had problems catching up with Google and not just because of the storage space. Gmail also has a brilliant spam filter and other features (integrating RSS feeds, MP3s and images as well as mobile accessibility and free pop3 services). But these other e-mail service providers have always had one advantage over Gmail. The latter was a "by invitation only" service, which meant that not everyone could sign up for Gmail.

Now, Google has addressed this issue. Anyone visiting the Gmail homepage can sign up for the service, and with class-leading features, many people might switch over. Because of the tight integration of Gmail and AdWords, this decision makes immense business sense for Google. And take our word for it, Gmail is worth it, even though it is possibly a critical part in Google's plan to dominate the internet!

World Bank Opens its Purse Strings for India

Investing in infrastructure: World Bank scales up its commitment
As India struggles to charge up its rural economy and invest in infrastructure, the World Bank is scaling up its commitments to India. "The Bank will increase its funding programme in India from an average of $2.5 billion (Rs 11,000 crore) to $4 billion (Rs 17,600 crore) over the next two-to-three years. We will especially focus on strengthening infrastructure, supporting states that are lagging behind the rest and scaling up service delivery," says Praful C. Patel, Regional Vice President (South Asia), World Bank.

Some of proposed projects that will benefit from this are the Andhra Pradesh Urban Reform and Municipal Services Project, the Bihar Rural Livelihoods Development Project, the National Urban Renewal Mission, the Coal-fired Power Station Rehabilitation Project, Delhi Water Supply and Sewerage Project, Gujarat Urban Development Programme, and the Himachal Pradesh State Roads Project. The enhanced commitments come at a time when the bank has recognised India's efforts to improve its business environment.

Tensions Growing Within Left

Bhattacharjee: Will he survive?
The agitations over Singur and Nandigram and the West Bengal government's handling of the issue have exposed the deep chasms that lie beneath the monolithic image that the Left has cultivated for itself. Buddhadeb Bhattacharjee's pro-industry policies have resulted in even smaller Left partners like the CPI, Forward Bloc and RSP, hitherto, too timid to speak out against Big Brother CPI(M), coming out openly against the Chief Minister. The pro-Bhattacharjee camp in the West Bengal unit of the party feels these parties are being encouraged by hardliners in Delhi and elsewhere who don't want to openly take on Bhattacharjee. The cm himself does not deny differences within the party and with a section leaders in Delhi. "Debates on important issues are only healthy and natural. But we are trying to establish a 'consensus' within the party that will facilitate the implementation of development programmes connected with contentious issues," he recently told the media.

Bhattacharjee, who feels he has the people's mandate to carry forward his version of economic reforms, is increasingly feeling cornered by the doctrinaire approach of his party's central leadership and the "armchair" comrades who make up the party's (fast depleting) numbers outside of West Bengal, Tripura and Kerala. No one is yet talking of a split in the country's mainstream Left movement, but party insiders say that senior leaders like Jyoti Basu and Harkishen Singh Surjeet are working hard behind the scenes to avert a headlong collision between the hardline central leadership and the reformist state satraps. "One formula being discussed is a variation of China's (but of course) 'one country, two systems' policy," says a senior leader in the West Bengal unit of the party.

What does this mean for the party, and the UPA government it supports, at the national level? "A good watchdog growls but seldom bites," says the leader. That can only be good news for the government.

The Election Effect

How do you know when the government is moving into election mode? You know it when it suddenly starts worrying about such mundane things as price rise, farmers' agitations and middle class anger. With elections due in states like Uttar Pradesh, Manipur and Uttaranchal, it is little wonder that the UPA government has woken up, albeit late, to the inflation rate, which touched 6.73 per cent in the third week of February. The Congress, stung by the recent reverse in the Mumbai municipal elections, and expecting to fare badly in Punjab, was quick to react. It cut prices of petrol and diesel by Rs 2 and Re 1, respectively.

UPA Chairperson and Congress President Sonia Gandhi shot off a letter to Prime Minister Manmohan Singh asking him to go slow on allowing multinational retail majors like Wal-Mart and Tesco access to the Indian market. She also asked the government to halt the acquisition of farmlands for SEZs. "The letter seeks appropriate safeguards and measures to ensure that the aam admi is not prejudiced by such economic activities," says a Congress spokesperson.

The Left parties, expectedly, are taking credit for this "pro-people" intervention, even though they are surprised by its timing. "We gave her a note on the subject in 2005; it's very strange that she has suddenly written this letter," says CPI(M) MP Nilotpal Basu. It isn't really strange. He just needs to consult his election calendar to know why.

It's Now BRIC vs BRIC

When Goldman Sachs coined the word BRIC (Brazil, Russia, India and China) in 2003, the world sat up and began to look at these countries in a new light. Since then, the BRIC nations have largely followed the script, dutifully recording high growth rates, attracting ever increasing foreign direct investment inflows and featuring on the front pages and covers of the world's leading publications.

Now, the script has taken an interesting turn. The BRIC nations, it seems, are competing furiously among themselves to acquire primary industrial and energy assets across the world. When Tata Steel announced its bid for European steelmaker Corus, it attracted a counter-offer from Brazilian steel company CSN. The auction that finally settled the issue in favour of the Tatas resulted in the final price escalating by 34 per cent over the original offer.

Says R.K. Agrawal, Director, Ernst & Young: "Yes, it is, indeed, a fact that the race to acquire overseas assets is hotting up and that BRIC countries are now competing among themselves in quite a number of cases." Sure enough, within days of Kumar Mangalam Birla announcing his $6 billion (Rs 26,400 crore) bid to take over Canadian aluminium company Novelis, there are sporadic reports of Russian Aluminium Company (RUSAL) considering a counter-offer. "I have no doubt whatsoever that the trend of companies from BRIC countries taking on each other for overseas acquisitions will continue in the years to come," says Sanjiv Goenka, Vice Chairman of RPG Enterprises and former President of CII. But, says Agrawal: "The successes of the Tatas, and L.N. Mittal before them, have given Indian companies the courage and confidence to take on a win against all comers."

One sector where Indian companies have been beaten comprehensively by their Chinese counterparts is oil. The China National Petroleum Company has routinely trumped ONGC Videsh's (OVL's) attempts to establish beachheads in the oil rich countries of Central Asia and parts of Africa. Whenever OVL came close to a deal, it found itself pipped at the post by a combination of aid and diplomacy launched by China.

So, are more such tussles likely in future? Watch this space.


Eyeing India: UBS Bank's Jenkins
UBS investment bank is aggressively eyeing the Indian market. It has already marked its presence in the M&A segment by partially funding two major deals-Vodafone's $11.1 billion (Rs 48,840 crore) acquisition of Hutchison Essar and Hindalco's still pending $6 billion (Rs 26,400 crore) buyout of Novelis. "We see a tremendously increased appetite in India for mergers and acquisitions, and that is why we want to rapidly ramp up our presence here," says Huw Jenkins, Chairman and CEO, UBS Investment Bank, who was in India recently.

The company has acquired Standard Chartered Bank's asset management company in India, and it is also considering expanding its existing offshoring business here. "We are also keen on setting up a branch of our bank here," he says, adding that UBS has been trying to get a clearance for the licence, application which is now pending for more than two years.

UBS feels Indian companies should look at West Asia for opportunities in the infrastructure, steel smelting and hydrocarbon sectors. "We can play a large role advising Indian companies on these and also help fund deals that materialise," he says.

The group also has a 2,000-seat offshoring centre in Hyderabad. "We want to expand this to world-class levels," Jenkins adds, but declines to get into specifics about numbers.