DC Debate: Foreign investment in Andhra Pradesh and Telangana State

While there is nothing wrong in the Chief Ministers of the two Telugu states going abroad to attract foreign investors, they should know that at least for the next one year, their challenge is to sort out the mess at home.

Neither state has, as yet, settled down to normal functioning. Indeed, neither has yet to learn to live and let live. Which foreigner would come to a state where its own neighbours are unwelcome?

The first question any foreign government or institution would ask of the governments of TS and AP is whether these entities are, and will be, in a position to service the debts they wish to incur in building a new capital, in the case of AP, and modernising the existing capital, in the case of TS. What is, and will be, the fiscal health of the two governments over the next several years? Another question that any investor would ask is how good the quality of public services and infrastructure wills be?

United Andhra Pradesh had a story to tell between 1991 and 2011. For two decades, the state was viewed as one of India’s more progressive states, and a good destination for investment. United AP climbed up the ranking of Indian states on a range of parameters during this period, despite the ups and downs and occasional problems.

However, over the past few years, the erstwhile united state itself began to slip and now the two divided parts leave many questions waiting to be answered regarding the direction and quality of state administration and the fiscal health of the two states.

Both CMs have wasted time and energy in an entirely avoidable competition of personalities. Forget about foreign investors, even Indian investors will watch and wait till they settle down.

Where can foreign investment make a difference? Most importantly in creating better connectivity that can reduce the cost of new investment. The Chennai-Visakhapatnam rail and road corridor, the Chennai-Tirupathi-Bengaluru road corridor and the Hyderabad-Warangal corridor can become hubs of new business activity if long-term loans are accessed for their development, like the Delhi-Mumbai industrial corridor.

As for new business activity, foreign investors will return to Hyderabad and other centres in the two states only when they are convinced that the state governments have settled down to do business and are functioning in a businesslike manner. No amount of showmanship will make a difference to hard-headed investors.

Director, Geo-economics and Strategy, International Institute of Strategic Studies, London and former media advisor to Prime Minister- Sanjaya Baru

The former CM of united AP is taking credit for having built Hyderabad into a world class city. The wedge between the city and the rural economy, with the rural economy being pushed into crisis, caused such grave havoc that it ultimately snowballed into the Telangana movement. One of the most important reasons why Chandrababu Naidu has been elected CM of AP is bec-ause he is seen as a person capable of building a city like Hyderabad.

Meanwhile, the CM of Telangana has acquired an image of a shrewd politician capable of strategising in a way that he can even outsmart seasoned politicians like Mr Naidu in pushing TS ahead.

Despite all the parochialism associated with regional identities, had these identities competed with each other on the imagination of a comprehensive idea of development, it might have augured well for both the states.

The most pronounced plan around which the intense competition between both the states has been taking place has been to attract Foreign Direct Investment. Per se, this may not in itself be an undesirable thing. However, the devil lies in the detail. The attraction of the FDI by both the states has come to be on the basis of mutually beating each other with reference to environmental, labour and such other regulation standards in the name of incentives. A classic tendency of a downward spiral of standards has set-in.

Mr Rao’s Pharma-hub versus Mr Naidu’s Petroleum-Chemicals and Petrochemicals Invest-ment Region in the coastal belt stands out as a testimony to this downward spiral. The Pharma-hub in TS is likely to be a further expansion of an already recognised ecological catastrophe of the well-acknowledged Pantancheru-Bollaram region, which has the dubious distinction of being one of the most critically polluted areas with a Comp-osite Environmental Pollution Index (CEPI) of 76.4.

In the new state of AP the so-called Pharma City has already taken its toll by destroying the livelihood of a large number of fisherfolk with effluents being openly dumped into the sea.

The flooding of the FDI also implies the flushing out of the rural masses from their lands, communities and community resources. Both the leaders seem to be happily blindfolded to this growing discontent caused by their visions. This unhealthy competition for FDI based on a myopic and unsustainable vision of development is likely to cause destruction of governance institutions and victimisation of vulnerable people.

While both the political masters may have a political price to pay eventually, the merchants sans the investors who seem to be threatening a capital flight, seem to be the greatest beneficiaries of this moment.