Adecade ago the Union of India welcomed into the fold its newest member: the state of Telangana. Of India’s then 29 states, it ranked 12th by population, 11th by area and 10th by per-person income. One of those rankings has since changed dramatically. By last year Telangana had shot up to boast the highest per-person income of any decent-size state, behind only tiny Sikkim and Goa.
That is not all. In the past decade the state’s gdp growth has outperformed India as a whole. With just 2.7% of India’s population, its share of the country’s annual output has increased nearly a fifth, to 4.8%. Hyderabad, its economic powerhouse, is a multilingual, multireligious metropolis with an abundance of high-tech jobs, including the largest Amazon office anywhere. Microsoft and Google are expanding their already substantial presence in the city. It is also a pharma hub. What is Telangana’s recipe for success?
The story of Telangana’s independence starts in 1956, when the region became part of a new Telugu-speaking state called Andhra Pradesh, or ap (see map). They shared a language, but the two had different histories, cuisines and dialects. Tensions soon rose, as Telugus from coastal regions came to dominate business and politics in Hyderabad, the capital. Telanganites insisted they were being discriminated against. A decades-long agitation for statehood culminated in its creation by an act of India’s Parliament in 2014.
The very fact of being new is one benefit of state formation. In 2000 India created three new states, hiving off chunks from unwieldy giants. For several years the new entities did better economically than the rumps they left behind. Yet that Telangana would thrive was not foretold (none of the other newish states sustained their early momentum). It was the poorer part of the state from which it was carved out. Unlike other prosperous southern states, it is landlocked. It still has only one airport. With the exception of Hyderabad, it lacks any cities of size. Many foresaw economic difficulties, even unrest.
K. Chandrashekar Rao, better known as kcr, had led the movement for statehood. But as the first chief minister of the new entity, he had to transition to governing. “There were a lot of apprehensions,” says K.T. Rama Rao, kcr’s son and a minister in that government (he is known, inevitably, as ktr). People worried that “these guys were running amok in the street… can they actually come govern?” The new government proved practical, reassuring businesses that their interests were safe. There were no reprisals against the Andhraite-dominated business community.
The moment of founding has a clarifying effect, says Suyash Rai of Carnegie India, a think-tank in Delhi, causing elites to think: “We need to get our act together…so the state becomes a stable political and economic entity.” There is immense pressure on leaders to prove themselves, both to voters and to their detractors. Having something to prove had “a lot” to do with the government’s thinking, says ktr.
Another advantage of new states is that they may have greater leeway to experiment. Upon creation, Telangana immediately set about making itself attractive to investors. Many Indian states eager to rise up ease-of-doing-business rankings promise “single-window clearance” for businesses to deal with the bureaucracy. But the process is still a painful mess, with multiple departments working to their own timelines. Telangana’s innovation was to do away with many requirements and promise approvals within 15 days. Such ideas were “only possible because we were a new state, and there was no legacy to pull you down”, says Jayesh Ranjan, a senior bureaucrat who was involved in drafting the policies. “Everything was a clean slate.”
Lastly, carving smaller chunks out of India’s bigger states—undivided ap was the fourth-largest by area—allows politicians and officials to more carefully tackle local issues. On a practical level, it also eases travel and administration. In Telangana the government focused on long-standing grouses: power, water and funds. Electricity generation capacity expanded from 7.8gw to 19.5gw between 2014 and 2023. Several projects to boost water for drinking and irrigation were put in motion. Welfare schemes for farmers were rolled out.
To be sure, Telangana had an advantage: Hyderabad. N. Chandrababu Naidu, chief minister of the undivided state between 1995 and 2004, had positioned himself as a tech-savvy leader, earning the city the nickname “Cyberabad”. kcr’s government doubled down on the tech-first strategy. According to a state-government report, it exports more than quadrupled to 2.4trn rupees ($29bn) between 2014 and 2023, and it jobs nearly tripled to 900,000.
Yet the dominance of Hyderabad alienated rural voters. Per-person income in its tech district is over twice the state average and five times that of its poorest district. Undernutrition among children has risen. Telangana’s voters showed the door to kcr at elections last year. He should have seen it coming: 20 years ago undivided ap booted out the urbane Mr Naidu in favour of a rival promising more evenly spread prosperity. (The rump of ap also grew robustly since bifurcation but lavished spending on handouts. Its fiscal deficit is nearly twice Telangana’s. This month voters brought Mr Naidu back from opposition.)
Telangana’s new government, led by the Congress party, has made it a priority to encourage growth elsewhere. It plans to promote investment outside Hyderabad. At the same time it has signalled that it will not reverse policies that are working well. Telangana’s record as a new state is impressive. But the real work to ensure its long-term prosperity—and strengthen the case for new states—is only beginning.
Source : The Economist