The clouds of uncertainty over the creation of Telangana as a separate State have finally been lifted by the Congress-led UPA alliance.

Today’s historic decision, while capping a phase of suspense over a fast growing economic region, could be viewed as a move to put development on track again in the region.

The State is being carved out with 10 districts, nearly six decades after the regionwas integrated into a united Andhra Pradesh rather reluctantly.

Interestingly in 1956, Pandit Jawaharlal Nehru described the merger of Telangana with the coastal districts and Rayalseema under the Madras Presidency as a marriage of a reluctant bride.

In 2013, the region is getting separated, after protracted agitations and political gamesmanship, led by the Telangana Rastra Samithi and demands from pro-groups within parties like the Congress, BJP, and TDP.

political mileage

By deciding to divide Andhra Pradesh, the Congress is looking at gaining maximum political mileage in the Telangana State with people’s goodwill and TRS support.

In the coastal Andhra and Rayalseema regions, it hopes to have post-poll alliance with the YSR Congress to retain power.

On the economic front, Andhra Pradesh, especially Hyderabad was among the top five destinations for investment. The ‘ticklish’ Telangana issue and the dilly-dallying by the Congress were reasons why sections of industry viewed the State with caution.

Consequently, IT, Pharma, hospitality, realty, health, and infrastructure took a beating despite “brand Hyderabad” with a global airport and infrastructure.

IT industry relieved

The information technology industry is mighty relieved by the decision. The image of the industry was dented because of the violent agitations and uncertainty over the future of the State

“Ït is going to be business as usual for the IT industry. A definitive move on the issue will help,” a spokesperson of the ITsAP (IT and ITES industry association of Andhra Pradesh), told Business Line.

B.V.R. Mohan Reddy, Chairman and Managing Director, Infotech Enterprises, said the industry has suffered in the last three-and-half years due to economic slowdown globally and the uncertainty over the separate Statehood issue.

“Though I’m not either for or against the formation of the separate State, a definitive decision on the issue would help the industry. A new State would mean development of a new city and infrastructure around it. The IT industry would grow there too,” he said.

Suman Reddy, Vice-President and Managing Director of Pegasystems India, said: “While we cannot assess the long-term impact of the decision on Telangana right now, the immediate impact in terms of ending the uncertainty surrounding the matter should bring back stability in the business environment of the city.”

Growth and expansion from multinational IT companies investing in the State had been stalled due to this issue. This is now expected to resume.

Pharma-Biotech

The pharma industry has reacted with caution. At present, Hyderabad has been the bulk drug capital of the country.

Though Visakhapatnam has the Jawaharlal Nehru Pharma city, the balance tilts in favour of Hyderabad. The Genome Valley and major vaccine-makers like Bharat Biotech and Shantha Biotech are also in Hyderabad.

Dr Reddy’s Laboratories Ltd, the biggest in the State, now has seven plants in Hyderabad, five in Visakhapatnam and one in Miryalaguda, in Nalgonda district.

“Whatever happens, we want peace of mind and all our plant locations were based on decisions taken much earlier,’’ Saumen Chakraborti, its Chief Financial Officer, said.

“Growth of bulk drug/pharma industry after bifurcation of State will depend on respective States’ policies. It is very important to create investment-friendly environment,’’ P. Bhaskara Narayana, CFO of Natco Pharma Ltd, said.

Boost to Infra, realty

The Centre’s decision has been taken as a mixed bag by the infrastructure companies. Most players in the sector have been wanting the uncertainty over the Statehood to be removed to facilitate growth.

Companies in the infrastructure and construction, real estate and those in hospitality have been pressing for a clear decision on creation of the Statehood or otherwise, as they feel clarity will boost sentiment. The prolonged agitation in the past has had a negative impact on these sectors.

Interaction with players in the sector shows that the creation of the State ends the uncertainty and removes the confusion in the minds of potential investors in the sector. They believe that the fundamentals of the mega city of Hyderabad in particular and other major cities such as Visakhapatnam and Vijayawada will continue to attract investments.

With inputs by V. Rishi Kumar, K.V. Kurmanath and G. Naga Sridhar

(This article was published on July 30, 2013)
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