Why Telangana is on a roll when it comes to investment inflows

With States shifting focus to more of their welfare agenda and the Modi government at the Centre making it amply clear that the governments have no business to be in business, private investments are turning out to be crucial for the development of any State in recent times. These investments have also become essential for generating employment opportunities for growing young populations as States, thanks to ever-increasing welfare budgets, are refraining from making large allocations for capital expenditure that generates jobs. That's the reason why many State governments, from Uttar Pradesh to Odisha, are holding investors' summits at regular intervals to attract new investments. Many of these States never made such aggressive efforts to lure private investments earlier.

But one State that has been attracting a steady flow of investments in the last several years is Telangana. The newly-created State attracted over Rs 3.3 lakh crore investments since its inception, said Telangana Industries & IT Minister K.T. Rama Rao (KTR as he is popularly known) recently. That works out to be more than Rs 36,000 crore a year. Of course, these numbers included expansion of the existing capacities as well as new investments. Still, they are impressive numbers for a small State like Telangana.

The Kalvakuntla Chandrashekar Rao-led BRS government, which is into its second term now, used excellent industrial, infrastructure and IT sector base created by the undivided Andhra Pradesh governments led by Nara Chandrababu Naidu (TDP) and Dr YS Rajasekhara Reddy (Congress) to Telangana's advantage and built on that through policy initiatives like Telangana State Industrial Project Approval & Self Certification System (TS-iPASS), among several others.

Under TS-iPASS that paved the way for quicker approvals, the State received investments totaling Rs 2.62 lakh crore since FY15, with the financial year 2017-18 topping the list with Rs 58,258 crore. Telangana, especially Hyderabad, also received heavy investments in the IT sector. Keeping pace with this development, the State government gave fillip to startups by setting up Technology Hub, popular as T-Hub. The continuous investment flow, especially into IT and pharma sectors, has had a multiplier effect on other sectors as it has generated a significant number of high-paying jobs. The phenomenal growth of the real estate sector in Hyderabad in the last few years bears testimony to this.

KTR played a key role in attracting investments into Telangana. Initially, he did not have a good team to support him. But that issue seems to have been settled now.

Telangana was lucky on several other fronts as well. Lack of aggressive efforts from neighbouring Andhra Pradesh and Karnataka in recent years to attract new investments also helped Telangana's cause. Karnataka was politically unstable and went from one crisis to another in the last five years as the 2018 elections churned out a hung Assembly. This reflected on the investments front even though the State is home to India's Silicon Valley-Bengaluru. With the latest elections throwing up a stable government there, there is every possibility that things may change for the better unless the newly-installed Congress government falls prey to internal squabbles.

On the other hand, the Andhra Pradesh government led by young Y.S. Jagan Mohan Reddy turned its entire focus on welfare schemes. As a consequence, not much has been done for getting new investments into the State. Of course, his government's attitude has been changing and it even organised Global Investors Summit (GIS) in Visakhapatnam recently. But the State still lacks a good team to make an aggressive push for investments.

The AP government's spat with the diversified Amara Raja Group did not help the State's cause either. The group, which has a sprawling industrial base in Rayalaseema region, recently unveiled its plans to make multi-million dollar investments in Telangana through its Gigafactory that will manufacture lithium cells and battery packs for electric vehicles. The group will invest over Rs 9,500 crore in this new facility over the next 10 years.

The Telangana government deftly handled and attracted several such investments that were to go to other States. When Sabu Jacob, Chairman and Managing Director of Kerala-based textile major Kitex Group, withdrew investments of Rs 3,500 crore from his home State alleging harassment by the Kerala government, the Telangana government swiftly swung into action and sent a special flight to bring him in for a discussion to make his investments in the State. The infant-wear group is now investing over Rs 3,000 crore in Telangana. This demonstrates the presence of mind of the Telangana government’s think tank and how aggressively it has been scouting for new investments. And getting them!

I was recently travelling in a cab in Visakhapatnam. The cab driver, a graduate, lamented about lack of employment opportunities in Andhra Pradesh. That's what has forced him to work as a cab driver. "We are not getting new industries and companies to Andhra Pradesh because we don't have a KTR. So, there are no jobs for us here," he lamented.

This appreciation for KTR is understandable but I don't think the investment flow into Hyderabad and the rest of Telangana will bring in electoral dividends to Bharat Rashtra Samithi (BRS), the new avatar of Telangana Rashtra Samithi.

Same is the case with the development. Elections are a different ball game altogether and BRS is hoping for a third consecutive term. However, lack of investment flow and development will definitely take a toll on political parties as it has happened in Karnataka in the latest elections. That's the political irony. But will Telangana continue its march in the investment space in the coming years?

It will continue to attract investments irrespective of who will come to power in the upcoming Assembly elections as the State has a well-established industrial, infrastructure and services sector base now. The only thing that it needs is a stable government. That's for sure.