Hugo Dixon

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Hugo Dixon

LONDON (Reuters Breakingviews) – Vodafone has won the first round in its war with Essar. The UK group’s partner in its Indian mobile venture is downplaying a plan to inject its stake into an illiquid shell – a move which could have artificially inflated the stake’s value. Although the saga could have more twists, the most likely conclusion is that Vodafone will pay $5 billion to buy out Essar completely.

Vodafone can feel pleased that it has thrown a spanner into Essar’s plan to pop part of its 33 percent stake in Vodafone Essar into Indian Securities, the listed shell. If

that had led to an artificially inflated value, Essar could have tried to use it as the basis for squeezing more money out of the UK group when its put options over the stake fall due in May.

Although Essar says it is still pursuing the plan, management accepts that Vodafone’s tactics mean it will no longer be able to complete the move before the May deadline. It will either have to take the fair value as determined by investment banks – or sell the entire stake for $5 billion, a price fixed four years ago when the Indian mobile market was less cut-throat.

LONDON, Jan 31 (Reuters) – Indian mobile phone operator
Essar has abandoned plans to inject part of its 33 percent stake
in the Vodafone Essar venture into a listed shell company after
objections by its partner Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz), according to two
people familiar with the situation.

Instead, the partners have agreed to appoint two investment
banks to value the stake in the Indian mobile operator as a
precursor to Essar deciding whether to sell it to Vodafone.

Essar was previously planning to inject an 11 percent stake
into Indian Securities (ISL) (ISEC.BO: Quote, Profile, Research, Stock Buzz), a listed company it
controls. It argued that this would reveal its true value.

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

DAVOS, Switzerland — The euro zone crisis may be close to resolution. There is certainly optimism among policymakers at the World Economic Forum in Davos that a comprehensive deal — involving more discipline by peripheral nations and more help from rich nations — could be put together in coming weeks. If so, the hot phase of the crisis could be over and even Greece would have a fighting chance of getting out of the woods.

There is still no deal. But the stars seem to be coming into alignment. Germany, the zone’s paymaster, clearly realises that it has a strong interest in the single currency holding together — and will do what is needed to make that happen. Peripheral nations also seem to be willing to go an extra mile to give Berlin enough air cover to sell further help to the German people.

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The global economy is not as healthy as it looks. The International Monetary Fund now predicts 4.4 percent growth for 2011. But inflation has reared its ugly head across the globe, suggesting that many economies are growing faster than can be sustained without structural changes. Spurring on reform should be the main focus of the annual World Economic Forum shindig this week in Davos.

If one wants to look at the glass half full, there are things to feel positive about. The U.S. economy is growing smartly again — the IMF predicts 3 percent this year. China and India should each grow at around 9 percent this year. Even the euro zone may be pulling itself out of crisis.

– The authors are Reuters Breakingviews columnists. The opinions expressed are their own –

By John Foley and Hugo Dixon

HONG KONG/LONDON (Reuters Breakingviews) – India needs a solution to a $1.5 trillion-plus puzzle. That’s what it will need to invest in infrastructure over the next decade if it is to have any hope of achieving its aspiration of 10 percent GDP growth.

The government and banks, India’s traditional sources of infrastructure funding, won’t be able to carry that load on their own. Financial liberalisation, something the country has hitherto shied away from, could help fill the gap.

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Hugo Dixon

LONDON (Reuters Breakingviews) – India can’t afford to be soft on corruption. The government’s lacklustre response to a series of scandals isn’t just woeful; it is symptomatic of a general lack of reformist zeal which could drag down the country’s medium-term growth.

India’s big success in the past two decades has been to put behind it what used to be called the Hindu rate of growth, roughly 3.5 percent a year. The country achieved an average 9 percent growth in the four years running up to the financial crisis. That dipped to 6.7 percent and 7.4 percent in the last two financial years, but is now back to nearly 9 percent. At some time over the next few years, India’s growth could outpace even China’s, as the Middle Kingdom starts to slow.

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Hugo Dixon

LONDON (Reuters Breakingviews) – India is behind the curve on inflation. It’s not just that weekly food inflation has hit 18 percent; the current account deficit is also uncomfortably high.

The authorities need to get a grip, even if that means sacrificing 9 percent GDP growth in the coming year. Structural reforms, not loose policy, are the only sure way to sustain rapid growth.