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Competitive Federalism in Southern India: A Case Study of Andhra Pradesh and Telangana

The Diplomat
By Professor  

Four decades after the birth of the political movement, and four years after a tumultuous struggle, Telangana came into being. India’s youngest state is at the country’s forefront,having come a long way from a 2.7 percent growth rate as part of undivided Andhra Pradesh in 2012-13 to a double digit growth rate of 10.01 percent in 2017. Its sister state, Andhra Pradesh (AP), is not far behind.

Telangana, under the leadership of Kalvakuntla Chandrashekar Rao (KCR), stood 3rd in the 2017 rankings of states receiving industrial investment proposals. The government’s new industrial policy TS-iPASS has contributed immensely to this surge of investments. The policy assures investors of timely clearances, and includes self-certification as one of the provisions. After the introduction of the policy in 2015 Telangana attracted investments of cumulative worth $11.2 billion and helped create 240,000 jobs.

Telangana also topped investment growth among its southern peers with an investment growth rate of 79 percent. But when it comes to ease of doing business, Telangana and AP shared the top rank according to the Department of Industrial Policy and Promotion  (DIPP). The Telangana chief minister took up attracting investments as a priority, and to aid the process he not only eased the power situation but also aimed to set up offices in various countries to promote the state’s policies and facilities, though this plan had to ultimately be shelved. Telangana does have a dedicated ministry for Non-Resident Indians (NRI) affairs that is headed by Kalvakuntla Taraka Rama Rao (KTR), who also serves as minister for several other portfolios including information technology (IT), municipal administration and urban development (MAUD), and textiles.

As a consequence of the Telangana government’s considerable efforts, the state managed to draw international giants like Uber, IKEA and Dreamworks, with Google, Amazon and Apple announcing their biggest campuses outside the United States in Telangana.

Additionally the government signed a pair of MoUs with Sany Group, a Chinese construction equipment company, to set up a prefab factory and construction of dry ports.

Andhra Pradesh, under the stewardship of Chandrababu Naidu of the Telugu Desam, is not too far behind; the government signed a MoU with the Performance Management and Delivery Unit (PEMANDU) under the Malaysian Prime Minister’s Office, which will assist AP in achieving growth and development and another MoU with Singapore-based Ascendas-Singbridge Pvt Ltd and Sembcorp Development Ltd to develop Amaravathi. Naidu also cleared proposals by Chettinad Cement Corporation, Rain Group, KCP Limited, Mohan Spintex India Ltd and Indo Count Industries Limited. AP isn’t too far behind Telangana’s 79 percent investment growth with its own 50.8 percent growth.

Whereas Telangana came up with TS-iPASS and T-HUB, AP came up with the First IT and single desk clearance policies. Both the states are competing in their efforts to digitize, encouraging digital transactions and setting up e-purses like AP’s “AP purse” and Telangana’s “E-Wallet.” The government of Telangana introduced Digital Telangana and signed a MoU with Google to aids its digitization efforts.

Both states seem to be engaging in competitive federalism, something that has been encouraged by Prime Minister Narendra Modi. In the late 1990s, early 2000s, during the IT boom, Andhra Pradesh and Karnataka had competed with each other in a similar fashion.

Populist Measures

Undivided Andhra Pradesh entered the technological age with a booming IT industry in the 1990s, Chandrababu Naidu was at the helm. He steered the state, especially the capital city, towards becoming an IT hub. The same Naidu is once again chief minister of Andhra Pradesh, but he has shifted his base from technocracy to populism. The first order he passed after being sworn in was a loan waiver for farmers, self-help groups and hand-loom weavers. Apart from this the government hands out gift packets to newly married girls and ration packets during festivals. All of this is done when the state is in revenue deficit.

Even though Telangana has a revenue surplus they are not far behind when it comes to embracing populism. Telangana extended its pension scheme to single women and beedi workers earlier this year. To attract various parties across the spectrum the government launched schemes like setting up of saloons for Nayi Bramhins, washing machines at the dhobi ghat for Rajakas and distribution of sheep to Yadava and Kurumacommunities.

Where Telangana Scores Over Andhra Pradesh

Despite competing in nearly every aspect Telangana has managed to gain an edge when it comes to regional parity by spreading investment and development across all its areas: a seed park at Siddipet, a dry port in Nalgonda district, and food parks at Jangaon, Sircilla and Khammam in addition to the pan-Telangana Mission Kakatiya scheme to provide irrigation and Mission Bhagiratha to supply potable water to households. Despite getting a large chunk of its GDP from the service sector, the state has managed to distribute investments across sectors, with the irrigation sector receiving about one-fifth of the investment.

On the other hand, the Andhra Pradesh government has concentrated on a few districts, leaving the Rayalaseema region discontent. Rayalaseema hasn’t seen sanction of major institutes except for the central university in Anantapur, whereas the tribal university, Petroleum University, and the much-hyped industrial corridors including for the prestigious petrochemical industry have been allotted to the coastal states. Even in the irrigation sector, the government seems to have prioritized the Pattiseema project catering to the Krishna delta region over the Galeru Nagari and Handri Neeva in Rayalaseema by shifting one of the pumps from these projects to Pattiseema despite rivers like the Telugu Ganga drying up. Even the Dugarajapatnam port has taken a backseat. In general, there is a disporprtionate leaning towards coastal states with the allotment of electronic (EMC) and hardware units to the chief minister’s home district of Chittoor a notable exception.

The competition aside, both states have eschewed animosity. Telengana’s KCR recently receiving a warm reception in Anantapur, for example. Electorally, up until now the ruling parties in both the states have managed to win all by-elections, with TRS also winning the municipal polls in Telangana. But 2019 will be a true test of the extent of the development and policies in both the states. AP’s Naidu definitely has his work cut out with Jagan Reddy being in the opposition; whereas KCR has an easier battle with a divided opposition in Telangana, but it will be a battle nonetheless.

Tridivesh Singh Maini is a New Delhi based Policy Analyst associated with The Jindal School of International Affairs, OP Jindal Global University, Sonipat.

Mahitha S. Lingala is a third year law student at the O.P Jindal Global University.