Hyderabad: With the formation of the new state of Telangana, on June 2, 2014, 20 per cent of the head-offices in Hyderabad are expected to shift to Andhra Pradesh. Since both states have stable governments, the industrial sector is expected to attract more investment.
There will be a slight increase in taxation due to the increased two per cent CST (Central Sales Tax), which will have a knock-on effect on the cost of goods. However, no physical movement of industries or labour is expected from one state to the other, despite the fact that 50 per cent of the industries in Telangana are owned by industrialists from AP.
The ailing industrial sector will see more growth in the already existing growth clusters, and many new clusters will be developed depending on the new governments’ policies. Industry insiders predict a bright scenario with more incentives coming their way from both states to woo them.
While currently industrial growth is more in Telangana region, a majority of the industries in the region are owned by entrepreneurs from Andhra. There had been concerns of physical damage to property in the region, but the industrial sector is certain this won’t happen.
“Most industries will not shift merely for the change of state. Business composition, availability of raw materials and movement of goods is far more important. About 15 to 20 per cent of head offices in Hyderabad of industries in Seemandhra are likely to shift to Seemandhra region. However, since more manufacturing zones will be required by both the new states, we expect not only the current incentives to continue but also the incentives to be increased by both the new States,” said V. Anil Reddy, vice president of the Federation of Andhra Pradesh Chambers of Commerce and Industry.
In Telangana, there is a concentration of industries in and around Hyderabad, mostly in the districts of Ranga Reddy, Medak and parts of Mahbubnagar.
The residual state of Andhra Pradesh has a huge land bank and almost no industry.
“While trading in all goods and services has been down by roughly 20 per cent in the last three months, industry and trade are expected to grow due to the stable government. Industry will grow very well especially if the new governments promote industry,” said an insider from the sector.
