Telangana crisis to take a toll on investments in Hyderabad

Fresh investment may not flow in as boards of multi-nations are receiving negative publicity about bandhs in the state

The ongoing agitation over Telangana would take a toll on investments in Hyderabad, specially information technology sector, said an Assocham industry survey.  

The Hyderabad region has been among the largest destinations of the foreign direct investment with cumulative foreign direct investment of $8.6 billion between 2000 and 2013. As many as 67% of the CEOs and senior managements of major corporates felt that the biggest casualty of the impasse is investment in Hyderabad, particularly in the IT sector.

While there is no threat of the existing companies shifting out of the city, fresh investment may not flow in as the boards of the multi-nations are receiving negative publicity about the disruptions, bandhs in the state.

“The situation is likely to continue till 2014 elections, taking a toll on the business environment not only in Hyderabad but other commercial hubs of the state such as Vijayawada, Kakinada and Visakhapatnam,” responded majority of the respondents.  

The United Progressive Alliance had made the decision to create Telangana, with Hyderabad being the join capital of both Andhra Pradesh and Telangana. The survey believes that the idea of a joint capital would be difficult to sell across the state and more work was required in building a political consensus.

Hyderabad along with Mumbai, Chennai, New Delhi and Bangalore are the favourite FDI destinations in India. The city witnessed increase in FDI even in 2012-13 to $1.16  from $848 million in the previous year. However, the trend may not continue till a clarity is available on the political situation in the state.

Over 91% of the respondents in the survey agreed that it is the IT professionals who have given a cosmopolitan character to the city which has also thrown in a new breed of global entrepreneurs and business houses. Some of the home-grown entrepreneurs and groups from the city of Hyderabad and Andhra Pradesh have taken their footprints across the world —including GMR group, Dr Reddy’s Laboratories, Lanco and GVK group.

As many as 81% of the Assocham survey respondents said they do not see early solution to the issue.