Small State theory

When the State of Telangana was created in June 2014, it was thought to have no economic future. An exodus of capital was predicted in its wake, and indeed Hyderabad did initially go through a real estate slump amidst fears that businesspersons of coastal Andhra Pradesh origin in particular would pack their bags. It goes to the credit of the K Chandrashekhara Rao government that nothing of the sort has happened. Dispelling initial fears raised by its household survey — conducted soon after it assumed power in 2014 — that the government would ask ‘outsiders’ to leave, the KCR government went out of its way to ensure that there would be no capital flight. Today, both Telangana and Andhra Pradesh are vying with each other to get investment proposals; this despite the fact that the latter is distinctly better off in terms of per capita income, and agriculture and industrial activity. In 2016, Telangana shared the top rank with Andhra Pradesh in the ease of doing business rankings of the Centre. KCR has scored some pluses in terms of easing the power situation, which may ensure that industry stays interested. Hyderabad remains a draw, with Apple, Uber, Amazon, IKEA and DreamWorks lining up. Telangana has the potential to move up the socio-economic ladder. The State government’s finances are better placed than the rest of the country. As much as 75 per cent of its revenue expenditure is financed from its own revenues in 2016-17, against the all-India average of 57 per cent (Andhra Pradesh’s is 51 per cent). Its interest outgo in 2016-17 was 8 per cent of its revenue expenditure, against the all-India level of 12 per cent. This allows KCR to undertake ambitious development schemes such as rejuvenating its tank irrigation systems — which, however, need to be executed with an eye for hydrological detail. A region that is plagued by backward agriculture (2,300 farmers’ suicides in three years) and undeveloped urban centres other than Hyderabad, could see a gradual transformation. The government’s controversial move to create 21 new districts (there were 10 earlier) may actually lead to better last-mile delivery.

However, the KCR regime has some singularly disquieting aspects. It is modelled on the politics of patronage and populism, not empowerment — not dissimilar to Jayalalithaa’s style. The State government has been reduced to a family concern. The overtly religious idiom of the chief minister — and his use of public funds to this end — has been a cause for concern. His intolerance of dissenting voices, including those who were at the forefront of the Telangana movement, is a bad sign.

Yet, Telangana lends credence to the argument that smaller States can be better run. The question, of course, is the basis and principles on which these smaller units are to be created and run. We have come a long way from the creation of States on linguistic lines. The accent now has to be on decentralised, inclusive governance.

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