by Moiz Mannan
Andhra Pradesh is at pains to dispel the clouds of uncertainty in the minds of foreign investors and non-resident Indians (NRIs) about investing in a state buffeted from time to time by the ongoing agitation in Telangana for a separate state.
The protestors claim that the Telangana region of the state has been neglected in terms of allocation of resources in comparison to its surpluses that have been transferred to other parts of the state. At times, the agitation has turned violent, throwing life and business out of gear.
As the state government tries to make light of the issue in the eyes of investors, it has become evident that uncertainty rather than the actual prospect of a separate state that has been the problem. Recently, a senior functionary of one of the state’s top industrial promotion bodies was in the Gulf trying to allay fears and get NRIs and foreign entities to invest in the state as they did before.
K Dharma Reddy, executive director of Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) was quoted by Gulf News as asserting that the situation had not deterred FDI and NRI investments in the state.
He said APIIC provided financial and tax incentives as well as guidance on profitable investments under the state’s industrial investment promotion policy. The policy for the 2010-2015 period aims at increasing the industrial growth rate from 12 percent to 17 percent. Among the major strategy initiatives are promoting national manufacturing investment zones and developing industrial corridors.
The state has several special economic zones (SEZs) offering world-class infrastructure to manufacturing and service industries. It also offers procedural ease for facilitating FDI, he said. Over the years, the state has recorded a healthy FDI inflow, thanks to Fortune 500 companies which have set up operations in Andhra Pradesh.
Reddy told the paper that Andhra Pradesh had 325 industrial parks with 130,000 acres of industrial infrastructure. The APIIC has also acquired land for 40 more industrial parks and SEZs, for which infrastructure is being provided to establish pharmaceutical and biotechnology clusters.
According to an Assocham report, Andhra Pradesh stood at the second place in the list of states attracting high direct foreign investments i.e. FDI. In 2011-12, nearly Rs.1.78 trillion of proposals have come across the nation in the form of foreign direct investments. Of this huge amount, 19 percent belongs to Andhra Pradesh. That means nearly Rs.339bn of investments have been proposed to Andhra Pradesh.
Associated Chambers of Commerce and Industry of India has revealed that the country received 763 foreign direct investments proposals, of which 70 proposals came to AP. The report, ‘Indian Experiences with FDI: Role of a Game Changer” puts Odisha at the top of the list of the states attracting foreign direct investments, with 27 percent of all foreign investments by value. With just 17 proposals, foreign direct investments in Odisha were of the value Rs.495bn. Gujarat stood in the third place, attracting foreign direct investments worth Rs202.5bn.
Andhra Pradesh provides opportunities for investment in various sectors. The State is rife with investment opportunities in the main thrust areas – broadly in the manufacturing and infrastructure sectors. In the manufacturing sector, food processing, agro processing (including floriculture), petrochemicals, basic metals, textiles, leather, mining and mineral processing, transport equipment, telecommunications hardware and electronics and engineering are attracting a great deal of attention.
In the infrastructure sector, development of power facilities, ports, roads and bridges, telecommunication facilities, industrial infrastructure and waterways is being emphasised.
The state holds the first rank in India in the production of rice, citrus fruits, chilli, oil palm, prawns, eggs and meat. It is second in producing fish, mango and tomato, third in cotton and cashew, fourth in flowers and fifth in grapes, banana, ginger and guava. This holds a lot of potential for the processing industry.
Goldman Sachs, in a report, spoke of Andhra Pradesh as India’s “most attractive state”, which had “adopted an innovative approach to attract foreign investment.” A World Bank survey in 2009 ranked Hyderabad as the second best metro city in India.
Having said all that, there are also reports that point toward a dip in investor confidence owing to the Telangana issue. In May last year, Business Today reported that IT exports from the state had fallen. They rose 24.5 percent, from Rs261bn in 2007-08 to Rs325bn in 2008-09. But in 2010-11, they were Rs350bn, up just 4.6 percent from Rs334bn in 2009-10.
Retailers say the growth of modern retail has slowed. It is around eight percent in Hyderabad, compared with 20 percent in cities such as Bangalore and Pune.
In its report, Assocham said the Telangana agitation would be prejudicial for the growth of the state, thereby impacting the flow of investments. The continual agitation in Andhra Pradesh, it said, was sure to hit the growth of IT/ITeS, manufacturing and real estate. Assocham Secretary General D S Rawat was quoted as saying, “Investors get jittery as general life is paralysed and business establishments are shut for days together.”
Against that backdrop, it seems the government is looking to shore up the state’s image among foreign investors, particularly NRIs. Whether or not the efforts hold emotional and logical appeal for Telugus settled abroad remains to be seen.