 "Statehood unlikely to divert capital from Hyderabad")
Will industry move away from Hyderabad? The question has cropped up following the approval given by both the Congress Working Committee and the United Progressive Alliance to the government's proposal to create a Telangana state out of Andhra Pradesh with Hyderabad as its capital for at least the first decade.
What fuels these speculations is the fact that over 90 per cent of the major manufacturing units and big businesses in the city, other than information technology, are promoted by entrepreneurs from the coastal Andhra regions of Krishna, Guntur and Nellore. These companies include Dr Reddy's, GVK group, Aurobindo Pharma, Nagarjuna Fertilisers and the GMR group.
Former member of the Planning Commission and chancellor of Hyderabad University, CH Hanumantha Rao, says there are valid concerns for people from outside Telangana residing the new state. He points out that the major issues of concern for Seemandhra (Rayalaseema and coastal Andhra) are the impact of Hyderabad's separation on Seemandhra's economy, the prospects for education and employment of youth in Hyderabad and the security of investments, properties, jobs and livelihoods of those from Seemandhra settled in Hyderabad and other districts of Telangana.
He says these are legitimate concerns that have to be addressed seriously. This calls for a constructive dialogue between the leaders of both the regions with understanding, spirit of accommodation and statesmanship.
The fear is that the creation of the new state of Telangana, within which lies Hyderabad, may queer the pitch for a lot of Andhra industrialists. One, that they might find the playing field not very level after division, and two, that they might face resentment if they decide not to move out of Telangana. However, beyond saying that the leadership of the new state has to deal with such issues sensitively, few in industry think there will actually be flight of capital from Hyderabad.
Business leaders hailing from coastal Andhra and Rayalaseema regions, the areas that will continue to constitute the state of Andhra Pradesh, say bifurcation of the state makes no difference to them. They are going to continue to invest in and run their businesses from Hyderabad. "Money goes wherever it get returns," they aver.
If major pharma companies, including Dr Reddy's and Aurobindo, have set up new plants in places like the potential Seemandhra capital, Visakhapatnam, in the past 5-6 years, it was only because there was a ban on expansion of existing units in the Nizam's city and not for any other reasons, according to Reddy.
There is also optimism that industry will not be impelled towards relocation. Telangana will be seeking ways to bring in more employment opportunities to the people of the new state. "Investments will only stop if there is trouble," reasons the pharma executive.
Expressing similar confidence, Chairman & Managing Director of IVRCL, E Sudhir Reddy, whose ancestors hails from the Rayalaseema region, says, "We have plans to grow further in Hyderabad." And adds A Shivaram Prasad from Guntur, promoter and managing director of Actus Pharma: "None of our existing units will move out of the city." But Prasad, whose company has units across both Hyderabad and coastal Andhra Pradesh, also says, "There may not be new investments for over a year till there is clarity on issues like development policies and the intentions of those who are going to head the two new governments after the bifurcation."
Prasad, however, points out that it is possible there will be flight of capital in the real estate sector. For the time being, non-resident Indians, hailing from coastal Andhra, may not feel comfortable investing in Hyderabad in the light of the proposed bifurcation, he says. But most companies from coastal Andhra may not afford to display any fickle behaviour as sectors like pharmaceuticals are firmly based in Hyderabad and are closely linked to the regional economy.
It isn't just the corporations that are complacent. Says Vamsi Vakulabharanam, associate professor of Economics at University of Hyderabad: "First, the joint capital status for 10 years has taken away the possibility of an adverse fallout on Hyderabad. Secondly, I don't think the political leaders will do anything to drive out capital from Hyderabad as they are fully aware of the role of industry in fulfilling some of the aspirations like creating employment opportunities for boys from the region."
Vakulabharanam has done extensive research on the socio-economic issues of Telangana in the past. Hyderabad, he says, is like the city of New York - a predominantly working-class urban centre transformed into an elite city by the injection of investment capital. Jobs and revenues are as important to Hyderabad as to any other global city to sustain and grow. Therefore, its vast base of middle-class consumers and the resulting revenues have to be preserved even when the new leadership seeks to restructure Telangana.
When it comes to talent pool there is no other place in the state that can beat Hyderabad. The city has a well-developed social infrastructure constituting over 100 research institutes, a host of academic centres and professional colleges. It is home to IT and pharmaceutical industry, the country's two top performing sectors, which are closely integrated with the global economy.
Defence establishment and public sector companies like BHEL feed a large manufacturing ancillary base spread over a dozen industrial areas located around the city. An international airport, a world-class outer ring road and the upcoming metro rail represent the most modern physical infrastructure available in any metro in the country.
According to the Sri Krishna Committee, appointed by the government to suggest ways of solving the statehood demand, Hyderabad accounts for 99 per cent of the IT and ITeS exports from the state. The composition of the firms established in the city is also largely national and international in character. Of the 94 groups identified for investments in the city and the surrounding Rangareddy district, 74 are from outside the proposed Andhra state.
Given this scenario, it is no surprise that Seemandhra entrepreneurs, who have made the state capital their own, have no plans to move out or stall their existing expansion programmes, though they are likely to wait for some more time to formulate their future plans. In particular, pharmaceutical companies are not keen to shift their headquarters from the city.
Even those who have already established additional units in Visakhapatnam say they have no plans to expand their operations in the coastal city. Limited availability of land, local problems and frequent interference from political leaders and activists of various political parties in the operation of their units are cited as some of the reasons for their reluctance to put all eggs in Visakhapatnam.
"We are going to remain here in Hyderabad," says an entrepreneur hailing from Nellore. "There will be no effect on the flow of investments into the manufacturing sector in Hyderabad so long as there is administrative and infrastructure support to industry."
Still, there is uncertainity in the air, especially after the Telangana Rashtra Samiti, the party that spearheaded the separate-state demand, seemed to suggest that priority in the new state will always be the sons of the soil. Moreover, there are many who argue that the leadership of the new state of Telangana will have to ensure that companies give jobs to the locals, while offering better wages and working conditions than the present. "If this makes someone unhappy, so be it. Without these changes, the people of Telangana will not be in a position to benefit from the so-called trickle down effect even after the formation of separate state," says an analyst.
As far as recruitment is concerned, an industrialist says that "we would consider the application of anyone who has the required skill and qualification. From which region they hail is immaterial to us."
In any case, say some experts, it is too early for entrepreneurs and companies to formulate plans for the future in the absence of clarity on various issues, including the status of Hyderabad or the location of a new capital for Seemandhra.
Meanwhile, because of the cosmopolitan culture of Hyderabad, entrepreneurs feel there will not be any problem in continuing their operations in the city. The year-round convivial weather of Hyderabad is another attraction. And once the political clouds lift, things could be all bright and sunny for the historic city.
HYDERABAD RULES!
* Home to IT, pharma industries; companies would be loath to move out
* Has a huge ancillary-industries sector due to presence of defence and public sector establishments
* Well developed infrastructure — like airport, metro, roadways, industrial areas — and availability of labour and services.
* Potential challenger Visakhapatnam has limited land and is beset with local problems
* No city in entire Telangana-Seemandhra matches Hyderabad as a talent pool. It has over 100 research institutes and professional colleges
* Large consumer base that is enticing to industry
* Has convivial weather throughout the year
What fuels these speculations is the fact that over 90 per cent of the major manufacturing units and big businesses in the city, other than information technology, are promoted by entrepreneurs from the coastal Andhra regions of Krishna, Guntur and Nellore. These companies include Dr Reddy's, GVK group, Aurobindo Pharma, Nagarjuna Fertilisers and the GMR group.
Former member of the Planning Commission and chancellor of Hyderabad University, CH Hanumantha Rao, says there are valid concerns for people from outside Telangana residing the new state. He points out that the major issues of concern for Seemandhra (Rayalaseema and coastal Andhra) are the impact of Hyderabad's separation on Seemandhra's economy, the prospects for education and employment of youth in Hyderabad and the security of investments, properties, jobs and livelihoods of those from Seemandhra settled in Hyderabad and other districts of Telangana.
He says these are legitimate concerns that have to be addressed seriously. This calls for a constructive dialogue between the leaders of both the regions with understanding, spirit of accommodation and statesmanship.
The fear is that the creation of the new state of Telangana, within which lies Hyderabad, may queer the pitch for a lot of Andhra industrialists. One, that they might find the playing field not very level after division, and two, that they might face resentment if they decide not to move out of Telangana. However, beyond saying that the leadership of the new state has to deal with such issues sensitively, few in industry think there will actually be flight of capital from Hyderabad.
Business leaders hailing from coastal Andhra and Rayalaseema regions, the areas that will continue to constitute the state of Andhra Pradesh, say bifurcation of the state makes no difference to them. They are going to continue to invest in and run their businesses from Hyderabad. "Money goes wherever it get returns," they aver.
* * * * *
Aurobindo Pharmaceuticals Vice-Chairman, Nityananda Reddy, who is a part of the promoters group, is emphatic that investments, particularly in respect of big and the capital-intensive industries, will not move out of Hyderabad. "The issues that are in focus in the present situation are government jobs and river-water sharing, not about industries established by the coastal Andhra entrepreneurs," he tells Business Standard.If major pharma companies, including Dr Reddy's and Aurobindo, have set up new plants in places like the potential Seemandhra capital, Visakhapatnam, in the past 5-6 years, it was only because there was a ban on expansion of existing units in the Nizam's city and not for any other reasons, according to Reddy.
There is also optimism that industry will not be impelled towards relocation. Telangana will be seeking ways to bring in more employment opportunities to the people of the new state. "Investments will only stop if there is trouble," reasons the pharma executive.
Expressing similar confidence, Chairman & Managing Director of IVRCL, E Sudhir Reddy, whose ancestors hails from the Rayalaseema region, says, "We have plans to grow further in Hyderabad." And adds A Shivaram Prasad from Guntur, promoter and managing director of Actus Pharma: "None of our existing units will move out of the city." But Prasad, whose company has units across both Hyderabad and coastal Andhra Pradesh, also says, "There may not be new investments for over a year till there is clarity on issues like development policies and the intentions of those who are going to head the two new governments after the bifurcation."
Prasad, however, points out that it is possible there will be flight of capital in the real estate sector. For the time being, non-resident Indians, hailing from coastal Andhra, may not feel comfortable investing in Hyderabad in the light of the proposed bifurcation, he says. But most companies from coastal Andhra may not afford to display any fickle behaviour as sectors like pharmaceuticals are firmly based in Hyderabad and are closely linked to the regional economy.
It isn't just the corporations that are complacent. Says Vamsi Vakulabharanam, associate professor of Economics at University of Hyderabad: "First, the joint capital status for 10 years has taken away the possibility of an adverse fallout on Hyderabad. Secondly, I don't think the political leaders will do anything to drive out capital from Hyderabad as they are fully aware of the role of industry in fulfilling some of the aspirations like creating employment opportunities for boys from the region."
Vakulabharanam has done extensive research on the socio-economic issues of Telangana in the past. Hyderabad, he says, is like the city of New York - a predominantly working-class urban centre transformed into an elite city by the injection of investment capital. Jobs and revenues are as important to Hyderabad as to any other global city to sustain and grow. Therefore, its vast base of middle-class consumers and the resulting revenues have to be preserved even when the new leadership seeks to restructure Telangana.
* * * * *
The consensus among industrialists is that investments will be driven by the availability of infrastructure, labour and other services. None believes that any city across the state, including a new capital in the truncated Andhra state, would match Hyderabad in these aspects in the decades to come.When it comes to talent pool there is no other place in the state that can beat Hyderabad. The city has a well-developed social infrastructure constituting over 100 research institutes, a host of academic centres and professional colleges. It is home to IT and pharmaceutical industry, the country's two top performing sectors, which are closely integrated with the global economy.
Defence establishment and public sector companies like BHEL feed a large manufacturing ancillary base spread over a dozen industrial areas located around the city. An international airport, a world-class outer ring road and the upcoming metro rail represent the most modern physical infrastructure available in any metro in the country.
According to the Sri Krishna Committee, appointed by the government to suggest ways of solving the statehood demand, Hyderabad accounts for 99 per cent of the IT and ITeS exports from the state. The composition of the firms established in the city is also largely national and international in character. Of the 94 groups identified for investments in the city and the surrounding Rangareddy district, 74 are from outside the proposed Andhra state.
Given this scenario, it is no surprise that Seemandhra entrepreneurs, who have made the state capital their own, have no plans to move out or stall their existing expansion programmes, though they are likely to wait for some more time to formulate their future plans. In particular, pharmaceutical companies are not keen to shift their headquarters from the city.
Even those who have already established additional units in Visakhapatnam say they have no plans to expand their operations in the coastal city. Limited availability of land, local problems and frequent interference from political leaders and activists of various political parties in the operation of their units are cited as some of the reasons for their reluctance to put all eggs in Visakhapatnam.
"We are going to remain here in Hyderabad," says an entrepreneur hailing from Nellore. "There will be no effect on the flow of investments into the manufacturing sector in Hyderabad so long as there is administrative and infrastructure support to industry."
Still, there is uncertainity in the air, especially after the Telangana Rashtra Samiti, the party that spearheaded the separate-state demand, seemed to suggest that priority in the new state will always be the sons of the soil. Moreover, there are many who argue that the leadership of the new state of Telangana will have to ensure that companies give jobs to the locals, while offering better wages and working conditions than the present. "If this makes someone unhappy, so be it. Without these changes, the people of Telangana will not be in a position to benefit from the so-called trickle down effect even after the formation of separate state," says an analyst.
As far as recruitment is concerned, an industrialist says that "we would consider the application of anyone who has the required skill and qualification. From which region they hail is immaterial to us."
In any case, say some experts, it is too early for entrepreneurs and companies to formulate plans for the future in the absence of clarity on various issues, including the status of Hyderabad or the location of a new capital for Seemandhra.
Meanwhile, because of the cosmopolitan culture of Hyderabad, entrepreneurs feel there will not be any problem in continuing their operations in the city. The year-round convivial weather of Hyderabad is another attraction. And once the political clouds lift, things could be all bright and sunny for the historic city.
HYDERABAD RULES!
* Home to IT, pharma industries; companies would be loath to move out
* Has a huge ancillary-industries sector due to presence of defence and public sector establishments
* Well developed infrastructure — like airport, metro, roadways, industrial areas — and availability of labour and services.
* Potential challenger Visakhapatnam has limited land and is beset with local problems
* No city in entire Telangana-Seemandhra matches Hyderabad as a talent pool. It has over 100 research institutes and professional colleges
* Large consumer base that is enticing to industry
* Has convivial weather throughout the year