India's new state

The Indian government appears to have given into demands for the creation of a new state of Telengana, following violent protests late last week. But will the important economic hub of Hyderabad be included in the new state's borders?

India’s central government has given in to demands for a separate state for Telangana to be carved out of the southern state of Andhra Pradesh, Press Trust of India reported December. 10, quoting Indian Home Minister Palaniappan Chidambaram. The decision was made at a late-night meeting between Indian Prime Minister Manmohan Singh, Congress Party Chairwoman Sonia Gandhi, Andhra Pradesh Chief Minister K. Rosaiah and Cabinet members.

The fight for Telangana statehood is a decades-old dispute dating back to a 1956 decision to merge the region – then known as Hyderabad state – with Andhra Pradesh on linguistic lines (the majority of the population in region speaks Telugu). The unified state government, however, proved inept in governing within these larger, geographically disparate boundaries.

Andhra Pradesh sits on the eastern half of the Deccan plateau and on the plains that lie east of the Eastern Ghats. The northern part of the plateau forms the Telangana region and is mostly deficient in resources and sustainable agriculture. Roughly split from Telangana by the Krishna River, the southern portion of the state, known as Rayalaseema, extends into the fertile, semi-arid coastal plains and, by contrast, is rich in natural resources. It is within this south-western region where agriculture and industry thrives. The Kudapa basin covers a major portion of the Rayalaseema region and is rich in minerals, particularly uranium and thorium reserves. The Krishna-Godavari basin off the coast is where private Indian energy giant Reliance Industries Limited has made massive petroleum and natural gas finds.

Telangana activists have long complained that their region has been the backwater of the state while the Rayalaseema region continues to thrive. Their bid for a separate state, however, rests heavily on their claim to Hyderabad, one of India’s two major information technology hubs (the other being Bangalore in neighbouring Karnataka state). Hyderabad hosts many of the world’s major multinational corporations, including Microsoft, Google, Dell, IBM, Motorola and Amazon. Driving roughly 15 per cent of Andhra Pradesh’s total income and roughly the same percent of India’s total exports by value, the IT hub is a key economic driver of the state and nation overall. The economic viability of Telangana is nearly wholly dependent on the fledgling state’s ability to keep Hyderabad within its boundaries. Unsurprisingly, Telangana activists have threatened civil war if the central government leaves Hyderabad off the Telangana map.

Telangana activists also have learned that the best way to capture New Delhi’s attention is to threaten the economic security of Andhra Pradesh’s prized IT hub. A day before the government’s announcement on Telangana statehood, mostly student Telangana activists took to the streets of Hyderabad and engaged in violent protests. Businesses were forced to shut down, hundreds were arrested and thousands of police armed with riot gear were deployed to quell the unrest. Spurring on the protesters, prominent Telangana politician K. Chandrasekhara Rao took some inspiration from Gandhi in performing a hunger strike and threatened to fast until death. This was not exactly a scene that Indian policymakers wished to portray to investors – hence, the emergency meeting in New Delhi called the same night of the protests and the seemingly rash decision on Telangana.

The central government has calmed the security situation in Hyderabad for now, but its swift response may end up causing more trouble down the road. Not surprisingly, the central government has thus far been extremely vague on the details and timeline of the Telangana statehood plan, with no mention of the status of Hyderabad. Andhra Pradesh already has an established state government with economic regulations and tax laws affecting the array of multinational firms in Hyderabad. Redrawing the map and placing Hyderabad in an undeveloped Telangana state under a fledgling government authority would cause intense concern for investors.

The Telangana movement is led by the Telangana Rashtra Samiti (TRS) political party, which developed a national presence in 2004 when it allied with the ruling Congress Party. TRS has since had a tough time convincing investors that it is business-friendly, in spite of its strong, leftist tendencies. Rumours are circulating that Hyderabad could instead be declared a union territory, separate from Andhra Pradesh and a newly-created Telangana state and be run directly by the government at the centre in New Delhi; however, serious doubts remain that such a proposal would be accepted by the main stakeholders – namely, the Telangana movement.

A political crisis already has erupted over the issue, with 92 members of the Andhra Pradesh state legislative assembly having tendered their resignations, including 30 members of the Congress Party, 38 from the opposition Telugu Desam Party and five from the Praja Rajyam Party. Concerns have been rising in New Delhi that this decision could end up forcing the government into discussions on conditions for creating other new states. Separatists have demanded a Vidarbha state in eastern Maharashtra, a Bodoland state in Assam and a Gorkhaland state in northern West Bengal. (The Gorkha movement already has announced an indefinite hunger strike, begun massive rallies and announced a four-day shutdown for businesses that will go into effect December 14-17.) More militant separatist campaigns in Kashmir and the restive north-east also could use this as an opportunity to fan the separatist flames.

India is a country fraught with internal divisions, spread across a diverse geography of 28 (now 29 states) and seven union territories, and divided among 2,000 ethnic groups, major religions and 1,652 officially recognized languages. Managing a fractious country of this size is no easy task, and the central government from time to time has had to figure out ways to contain separatist tendencies from various ethnic groups. On one end of the spectrum, violent separatist movements like the one in Kashmir in the northwest and in Assam in the north-east are dealt with primarily through force. At the other end of the spectrum, the Indian government has readjusted state lines in recognition of ethnic divisions. For example, in 2000, the eastern state of Chhattisgarh was created out of eastern Madhya Pradesh, Uttarakhand out of parts of northern Uttar Pradesh and Jharkhand from the southern districts of Bihar.

Those political decisions, however, had significant security repercussions. Indian policy making is not particularly effective at following up such decisions with sustainable economic development plans. As a result, a Maoist-influenced Naxalite insurgency has thrived along the rural eastern belt of the country, taking full advantage of the scores of disaffected groups living in abject poverty. Naxalite groups have been steadily pushing the Telangana bid for statehood, recognizing the opportunity to recruit separatist youth to their militant cause. New Delhi may be calculating that by answering the demands of the Telangana separatists, it will be taking some of the steam out of the Naxalite insurgency in Andhra Pradesh, but such an assumption rests on the economic viability of this newly-created state.

A major dilemma has thus been presented for Telangana, Andhra Pradesh and the central government. If the central government decides to keep Hyderabad out of Telangana’s state boundaries, then Telangana will lose its source of economic power and prestige. The lack of economic development will only compound the security issues in the region and provide more fodder for the Naxalite insurgency. If the central government decides to answer Telangana demands and includes Hyderabad within a Telangana state, then Telangana will have the economic tools it needs to survive. At the same time, such a political decision would come at the cost of India’s prized IT corridor. The central government, particularly in this negative economic environment, will be loath to place Hyderabad’s economic future in jeopardy for the sake of Telangana claims to statehood.

The Indian government was swift in putting down this latest wave of Telangana unrest, but with the fate of Hyderabad hanging in the balance, India’s 29th state could end up triggering an even larger conflagration.

Stratfor provides intelligence services for individuals, global corporations, and divisions of the US and foreign governments around the world.


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