Political Empowerment of Telangana

– A key Lesson from the Encouraging Performance of Smaller States*

By: C.H.Hanumantha Rao
1. Introduction:

Sri Nrupender Rao garu, Chairman of this function; Sri Venkateshwarlu garu, President, Telangana Chambers of Commerce and Industry; other office-bearers of the Chambers; Distinguished Speakers on the Dias; and ladies and gentlemen. I am extremely delighted, and indeed excited, to be present on this important occasion for the launching of the Telangana Chambers of Commerce and Industry.

Achieving economic growth with social justice has always been the foremost objective of economic planning in India since independence. Although the achievements in this respect have been substantial, growth achieved was much slower than planned and reduction of poverty was also slow. It was after the launching of economic reforms in the early 1990s that the growth rate of the economy accelerated, but the reduction of poverty became even slower with rising inequalities in income. In view of this, the plan strategy was reviewed and the Eleventh Five Year Plan aimed at achieving faster and inclusive growth. In the last few years, however, issues like the degradation of environment and large-scale displacement of people and destruction of their livelihoods, especially in tribal areas, on account of indiscriminate mining and certain other projects have come into sharp focus. Responding to these growing concerns, the government of India has recently come out with the three-fold strategy of faster, inclusive and sustainable development during the Twelfth Five year Plan.

But the effective implementation of such a strategy calls for vastly improved governance at the state level, social cohesion and proper accountability of administration with the active participation of the people down to the grass roots level. Experience has shown that these tasks can be better accomplished in smaller states.

2. Increasing Role of the State in the Post-Reform Period:

Liberalization and globalization have, no doubt, released the creative energies of our entrepreneurs and people at large. But, contrary to conventional wisdom, the role of the government has become more important in the post-economic reform period even after the removal of licensing, controls and other restrictions which led to the widening of economic freedom for industry, commerce and trade. This is because the state continues to be the main propeller for the provision of infrastructure like irrigation, power, roads, transport and financial institutions either directly, or indirectly through the private sector or through public-private participation.

Further, the role of the government in awarding contracts, choice of locations for private sector projects and technical institutions, decisions about the number, type and location of special economic zones, land acquisition and compensation policies, various kinds of patronage extended to different enterprises and activities, etc., could together make a greater impact on the economy than in the pre-liberalization period, especially at the state level. In general, the impact is in the direction of increasing inequalities between different states and between different regions and income groups within the states, particularly among the larger ones. This is because official patronage tends to favour the better-off regions and income groups already well-endowed with resources, skills, power and influence. This experience clearly shows that certain backward regions, if constituted as separate states, may use this enormous potential offered by state power effectively for their development.

3. Better Performance of Smaller States:

This is amply borne out by the recent experience with the creation of smaller states like Uttarakhand, Chattisgarh and Jharkhand. These states have been able to achieve much higher growth rates in their Gross State Domestic Product (GSDP) than the targets set for them by the Planning Commission. In fact their growth rate have been significantly higher than those achieved by their parent states, namely, Uttar Pradesh, Madhya Pradesh and Bihar. Better governance in these smaller states has contributed to attracting greater private investment from outside as well as to better planning and utilization of resources. This experience shows that the political commitment necessary for a focused attention on the problems of growth, equity and sustainability can be better ensured in smaller states which are relatively homogeneous.

An interesting consequence of carving out such smaller states is that their parent states become smaller and, for similar reasons of viability and efficiency, they can be expected to grow faster in course of time. An extremely encouraging development in this respect relates to Bihar where its GSDP growth rate has accelerated in the last few years. This may be attributed to improved governance, of late, in this state, because, among other things, with the creation of Jharkhand, Bihar has become more cohesive and much smaller in area with the size of its population getting reduced by one-fourth.

Among the general category states in the country, the growth performance of smaller states has been particularly impressive in the post-reform period. During the pre-reform period of 1980s, there was hardly any correlation between the size of the state measured by population and growth rate in GSDP. Over the last decade, however, one finds the emergence of a significant correlation between the size of the state and growth rate achieved, smaller states such as Punjab, Haryana, Gujarat, Karnataka, Kerala ,Tamil Nadu, Chattisgarh and Jharkhand showing much higher growth rates in GSDP than the larger ones like Uttar Pradesh, Bihar, Madhya Pradesh and Rajasthan. This experience shows that smaller states have been better placed to exploit the opportunities opened up by economic reforms.

Several of these smaller states also show higher levels of per capita GSDP as well as higher tax-GSDP ratios indicating their economic viability. It may be recalled that at the time of the formation of Andhra Pradesh, a strong consideration weighing with the Seemandhra leaders for integrating Telangana with Seemandhra was the chronic revenue deficit of Seemandhra and existence of revenue surplus for Telangana. Over the last half a century, however, with the steady growth in per capita income and tax revenues in both the regions, economic viability in terms of the size of GSDP or public revenues is no longer a constraint either for Seemandhra or for Telangana. As the Srikrishna Committee observed, “Telangana region (excluding Hyderbad) ranks 15th in the list of 28 states (excluding AP) in terms of absolute amount of GDP……..In terms of per capita income, Telangana (excluding Hyderabad) ranks 13th in GSDP as well as per capita income….Thus from the point of view of sheer size of economy, Telangana as a new state can sustain itself both with and without Hyderabad” (Chapter 2, p.121; Appendix 2.25).

4. Politics of Development in Bigger States – Discrimination Against Backward Regions:

Maharashtra and Andhra Pradesh stand out as glaring cases of politically dominant groups hailing from the developed regions discriminating against the backward regions in respect of investment and employment. Maharashtra, because of its developed physical and financial infrastructure, has been able to attract disproportionately large investments in the post-reform period whether from the All India financial institutions or foreign direct investment. But these investments have been concentrated basically in the developed pockets like the Pune-Nasik belt to the neglect of backward regions like Vidarbha and Marathwada. This has happened despite the constitutional provisions in respect of Mharashtra, unlike for Andhra Pradesh, to safeguard the interests of backward regions through the establishment of Regional Development Boards with special powers to the Governor for monitoring the progress. Clearly, politics of development have had an overriding influence undermining the constitutional provisions in favour of backward regions.

As for Andhra Pradesh, I would like to recall first what I once asked late Professor K. Jayashankar: “ What explains so much discontent and unrest and vehemence for statehood in Telangana when compared to Vidarbha which is as backward or even more backward than Telangana?” His crisp response was quite revealing which answered several other unasked questions: “Vidarbha has been neglected whereas Telangana has been exploited!” By now, there is plenty of evidence to show how Telangana has been deprived of its legitimate share in public investment and employment and how the natural resources of the region like land, water, forests and minerals have been alienated on a large-scale to the enterprising migrants from Seemandhra. Private investments from within the country and abroad are welcome in so far as they create productive assets and jobs for the locals. But investment flows from the developed to the less developed regions within a state often result in the appropriation of jobs by the migrants, apart from the alienation of natural resources. Whereas such investments do result in stepping up the GSDP growth rate of the region, deprivation of jobs and natural resources and degradation of environment lead to discontent, unrest and tensions.

On the question of various deprivations suffered by the people of Telangana, I can not do better than refer to the illuminating and effective presentation by the Telangana Chambers of Commerce and Industry in Support f Separate Telangana State, made before the Committee for Consultation on the Situation in Andhra Pradesh, headed by Justice Srikrishna. According to this submission, among the category of Medium and Large-Scale Industries in the state, 62% of companies were located in Telangana during the period 1991-2010. Out of those located in Telangana, as many as 75% were owned by Andhra entrepreneurs, the remaining 25% owned by those from Telangana. While companies located in Telangana accounted for 56% of total employment generated, what is revealing is that as much as 75% of this employment generated in Telangana belonged to Andhra youth, remaining 25% to the Telangana youth. As regards Small-Scale Industries till 2007, 56% of total employment was generated in Telangana. Out of this 70% belonged to Andhra youth, remaining 30% for Telangana youth. A case study of Hyderabad Unit of Bharat Heavy Electricals Limited reveals that in the category of General Managers and Executives, 80% to 90% belonged to Seemandhra. Even among the contract labour nearly two-thirds, and among staff and workers a little over half belonged to Seemandhra. As for the software industry in Hyderabad, the local youth do not constitute even 5% of total employment. What is more disturbing, there are glaring instances of transporting and dumping the hazardous wastes from as far as Visakhapatnam and its neighbouring areas to the outskirts of Hyderabad – that too in the encroached government land!

The above narration explains the paradox of high GSDP growth rate experienced in Telangana coexisting with mass discontent and strong demand for separate statehood. What is at issue, therefore, is not whether growth has been taking place, but how the benefits of growth are being shared by different sections of people. Therefore, when some of the protagonists of Telangana assert that the real issue is ‘self-respect’ through political empowerment or statehood rather than ‘development’, what they mean is that the real issue is ‘inclusive and sustainable development’ which is not possible unless people’s ‘self-respect’ is restored through political empowerment or statehood.

Who wields effective political power at the state level is central to the understanding of regional inequalities within a state. Andhra Pradesh provides a glaring illustration of state power being decisively influenced by the politico-business elite from a particular developed region to sub-serve its interests while denying level playing field to commerce and industry in a backward region like Telangana. Srikrishna Committee specifically names at least four major business groups from Seemandhra having enormous political clout as members of parliament and ministers who are actively engaged in real estate industry and other business in Telangana (Chapter 6, p.319). Yet, the Committee did not face squarely the issue of political dominance as central to the statehood demand for Telangana. Otherwise, it is difficult to explain its recommendation for keeping the state united by creating a statutorily empowered Telangana Regional Council – an experiment which miserably failed earlier. Their opting for status quo only shows lack of courage, especially when the Committee in their Report characterized Telangana movement “as a desire for greater democracy and empowerment within a political unit…. cutting across caste, religion, gender and other divisions, the Telangana movement brings a focus on the development of the region as a whole, a focus on rights and access to regional resources and further, it pitches for a rights-based development perspective whereby groups and communities put forth their agendas within a larger vision of equitable development”(Chapter 7, p.413).

5. What Next?:

Telangana is a national issue reflecting the aspirations of the people in different parts of the country for shaping their destinies through political empowerment. The demand for carving out four smaller states from Uttar Pradesh – the largest state in the country – represents such aspirations. Unless it is believed that the number of states in the country would be frozen at the present level for ever, creation of Telangana state would be foremost on the agenda, if there is to be any reorganization of states at all. This is because, as discussed above, the unrest giving rise to the demand for Telangana state is bound to grow as the issues causing this discontent can not be resolved except through political empowerment. The demands for creation of smaller states in Uttar Pradesh and in other parts of the country only strengthen Telangana’s case for statehood, but do not tie it up with them. Rather, the reality of Telangana becoming a state may push the demand for Vidarbha and smaller states in Uttar Pradesh to the centre- stage.
This has to be a continuing process, each case being decided on merits rather than an attempt at once-for-all reorganization of states in the country on certain theoretical or a priori considerations set out by a body like another States’ Reorganization Commission.

I would now like to conclude by offering my very best wishes to the Telangana Chambers of Commerce and Industry for every success in their efforts to inspire the young and the upcoming youth to venture into innovative enterprises, guide them in getting access to the required knowledge and resources and for overcoming the hurdles that a less developed region like Telangana has been facing for want of necessary political clout.
*Inaugural Address delivered on the occasion of launching of Telangana Chambers of Commerce and Industry, at Golkonda Hotel, Hyderabad, on 21 December,2011.

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