Article: Telangana: Economic implications of the bifurcation

Strategic HR

Telangana: Economic implications of the bifurcation

CII projects creation of 35 million jobs by 2020 even as several industrial projects hang in balance in Andhra Pradesh
Telangana: Economic implications of the bifurcation

July 30 was a red-letter day in the history of Andhra Pradesh. Though the demand for Telangana had been simmering for more than half a century, the Congress-led UPA’s move to bifurcate the largest south Indian state with 23 districts has raised many eyebrows. What will probably overshadow Telangana’s emergence as the 29th state in the Indian Union is the fact that this decision was made in the run-up to the 2014 General Elections and possibly state Assembly elections in AP – the last Assembly poll was held in May 2009.

In fact, the Justice B.N. Srikirshna report on “Committee for Consultations on Situations in Andhra Pradesh” released in 2010 said that in the interest of the larger good, the state must be kept united. “The Committee considers that unity is in the best interest of all the three regions of the state as internal partitions would not be conducive to providing sustainable solutions to the issues at hand. In this option, it is proposed to keep the state united and provide constitutional/statutory measures to address the core socio-economic concerns about development of Telangana region,” the report said.

The uncertainty plaguing Andhra Pradesh has affected the flow of investments into the IT and ITeS hub of Hyderabad, which will be the joint capital of both the states for a period of 10 years. Why is this important? Well, the ‘Hyderabad Metropolitan Development Authority (HMDA), covering a total area of 7,073 sq km and with a population of over 7 million, is almost twice the size of Goa and even bigger than the National Capital Territory of Delhi. It also hosts several ‘strategic’ government establishments, out of which 28 are related to national defence, and public sector organisations. It has also affected the flow of foreign investment into the state, with it recording a drop from $1.2 billion in 2010-11 to $848 million in 2011-12.

The Telangana region, which has 10 of the 23 districts in AP, has prospered from economic benefits of having Hyderabad and manufacturing base of Ranga Reddy close by, which attracts investors from Coastal Andhra Pradesh and Rayalaseema regions. Telangana’s broad economic parameters, such as the Gross State Domestic Product (GSDP), which is the total value of goods and services produced in a given year, and standard of living as indicated by per capita income, in 2009-10, stood at approximately Rs 2,16,281 crore, which was a little less than half of Andhra Pradesh’s Rs 4,90,411 crore GSDP in the same period. However, if Hyderabad’s contributions were not included then Telangana’s share of the GSDP pie falls drastically. Other districts in the Telangana region had registered low per capita income than other parts of the state, according to Hindu Business Line.

The economic cost of the bifurcation is many and here we enumerate some of them.

Industrial Parks: About 27 new industrial parks to come up in Andhra Pradesh are now hanging in balance. Andhra Pradesh Industrial Infrastructure Corporation (APIIC), which is developing the parks, made a presentation to Chief Minister N. Kiran Kumar Reddy on the need to develop the new industrial parks about a week before the formation of Telangana state was announced, a Hindu Business Line report said.

Currently, Andhra Pradesh has 319 IPs and 76 Special Economic Zones. “Many of the IPs are completely saturated and hence there has been a need for new industrial parks,” APIIC, a nodal agency for development of SEZs and IPs in the state, said in the presentation. Out of 27 IPs, 15 are proposed to be set up in Andhra/Rayalaseema regions, while the remaining is in Telangana. This also includes industrial parks exclusively for women entrepreneurs.

Real estate: Real estate prices, which haven’t moved since 2009, due to the Telangana agitation, were driving investors to other cities such as Bangalore and Chennai. CRISIL Research said in a report that investor sentiment is likely to improve in the immediate term, which will in turn lead to demand for commercial office space in the medium term. This will provide a boost to job creation and residential real estate demand, the research report said.

Land acquisition: The projects are likely to run into rough weather as issues such as acquisition of land, revenue and investments would have to be dealt by the respective state governments. As of now, APIIC has got a land pool of over 1.24 lakh acres of which 74,422 acres have been allotted. The whole process is under “utter confusion’’ according to a senior functionary of APIIC.

The bifurcation of the state is also expected to delay execution of National Investment Manufacturing Zones (NIMZs). Recently, the state government has received in-principle approval for three (NIMZs) in Chittoor, Medak and Prakasam districts. The land acquisition for Chittoor and Prakasam NIMZs is underway and it is completed in Medak. The state government is now preparing to sanction special staff to APIIC to oversee NIMZ activities, which might get delayed now.

However, the immediate consequence of the bifurcation is the number of strikes that have popped up. Government employees from coastal Andhra and Rayalaseema regions are on strike so are staff from the electricity department.

Over four lakh government employees began an indefinite strike to demand the Centre to take back its decision to carve out a separate Telangana state, Times of India reported. Employees and workers of all government departments have joined the strike. The Andhra Pradesh Non-Gazetted Officers (APNGO) Association, which called for the strike, has exempted emergency services in health, municipal administration and electricity departments.

With all the simmering tension in the region, production in many factories has been affected. With employees belonging to Telangana and Seemandara regions not talking to each other since the bifurcation was announced, it has led to total chaos in administration in several departments. State Major Industries Minister J Geeta Reddy sought to allay the fears of the industry, saying everything would be done to protect business interests.

Reddy held a meeting with the representatives of CII, FICCI and FAPCCI in Hyderabad on August 12 and assured them that the concerns of the industry would be addressed and there was no room for any apprehension. Sharing of power, water, security of businesses and employees, fate of memoranda of understanding related to various projects, were some of the “concerns” raised by the industry, Geeta Reddy told PTI after the meeting.

Terming the meeting as “encouraging”, CII AP president Ashok Reddy said, “CII always works with the government for better results. We will support the government in developing industry even after the (proposed) division of the state. As per our projection, 35 million jobs will be created in the state by the year 2020,” Ashok said. He, however, said that the uncertain climate over the state’s future, particularly Hyderabad, still prevailed. Whether CII’s projection will hold true or not is something that only time will tell.

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Topics: Strategic HR, Employee Relations

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