How Telangana is using technology to transform its economy

The state of Telangana, the country's newest and 10th largest, emerged from its bifurcation with erstwhile Andhra Pradesh with a challenge: one of deep economic divide and low growth.
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Mar 29, 2016, 11.32 AM | Source: CNBC-TV18

How Telangana is using technology to transform its economy

The state of Telangana, the country's newest and 10th largest, emerged from its bifurcation with erstwhile Andhra Pradesh with a challenge: one of deep economic divide and low growth.

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How Telangana is using technology to transform its economy

The state of Telangana, the country's newest and 10th largest, emerged from its bifurcation with erstwhile Andhra Pradesh with a challenge: one of deep economic divide and low growth.

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Jay Shankar (more)

Chief India Economist & Director, |

The state of Telangana, the country's newest and 10th largest, emerged from its bifurcation with erstwhile Andhra Pradesh with a challenge: one of deep economic divide and low growth -- the reasons why the division took place in the first place.

But the TRS government has pulled out all stops in order to boost growth, using technology as a key enabler to improve productivity, transparency and ease of doing business, says a report by brokerage firm Religare.

Economists from the firm recently undertook a three-day road trip to the state (visiting districts Hyderabad, Nizamabad and Zaheerabad) meeting companies, dealers, farmers and government officials. The takeaways: consumption is strong, the government has a strong industrial policy in place, and technology is playing a big role in the state's transformation.

"The slowdown that one has seen [in broader rural India] hasn't played out as much for Telangana. The state effected a 43 percent hike for government employees. This helped boost consumption," Religare Institutional Research Chief India Economist Jay Shankar told CNBC-TV18 in an interview.

He said that Hyderabad's rise as a technology and business hub has helped policymakers frame pro-investment rules.

"This will go a long way in industrialising other districts of Telangana," he said.

Below is the verbatim transcript of Jay Shankar's interview with Sonia Shenoy & Reema Tendulkar on CNBC-TV18.

Reema: Could you walk us through what your key takeaways are from the three day road trip to Telangana?

A: First, the kind of slowdown that one would expect because of not-so-good monsoon in the last two consecutive years, it is not that bad. So at least in the districts that we visited and feedbacks and the channel checks that we did, demand is slowing down that significantly as one would have expected.

There are different dynamics to the state, and in particular to some of these districts that we visited. For example, Telangana had huge salary increases last fiscal, effective from April 1, 2015. The salary hikes were 43 percent.

Latha: Salary hikes in what. Was it private sector, public sector?

A: I am talking about the state government. They have state Pay Commission Revision Committee which recommended less than 40 percent, around 35-38 percent but the government gave 43 percent salary hike. So that has translated into-not really boom but significant increase in demand for typical durable goods; two-wheeler demands, four-wheeler demands and surprisingly when we met the Maruti Suzuki dealers, Alto is no more an entry level car because of aspirational thing. We discovered that Swift and Swift Dzire have become the new entry level cars. However, similarly for the Hero Motocorp dealer that we met, Glamour is the best selling bike for his business. More than 50 percent of his volume turnover is coming from Glamour rather than Splendor or Splendor Plus. So that is the kind of "premiumisation" that is happening.

Latha: When the two states were bifurcated, the big fear was that Telangana is the poorer cousin which us why they were asking for bifurcation and the investments in Telangana had come from Andhra Pradesh guys. Is there any fear that Andhra Pradesh will deindustrialise Hyderabad or Telangana?

A: Highly unlikely because the political dynamics have changed to the extent that when we visited Hyderabad and the secretariat, the secretariat as of now housed in the same block and people are the same, at least in the administration. Obviously, they have given different portfolios and different states but quite unlikely because Hyderabad is the business hub followed by Ranga Reddy and Medak is one of the most industrious districts wherein you have a lot of industries specially Mahindra 's tractor plant and several other industries in that particular district. So Telangana of the ten districts, it is fair to say that the focus of the policy makers historically has remained focused only on two or three districts. The rest of the districts have not got that focus and that is the focus which the government is having. However, when we met the policy makers, they have come out with industrial policy which is one of the best in the country because they have advantage of late coming and hence learning from other states. So the lessons that they have got especially from states like highly pro investor friendly states like Gujarat and off late even West Bengal and several other states like Tamil Nadu etc, for example when I wanted to setup a plant in Telangana, I apply online. There is a single window concept which is called Telangana State Project Approval and Self-Certification System (TS-iPASS) and the onus is on the government to give them all the permissions and clearances within 15 days for large projects, for large scale industry. If I am not getting that permission from the government then it is deemed to be approved and I can go ahead by self certifying myself. So that is the kind of pro investor friendly industrial policy which the government has come up with. So that will go long way in industrialising the remaining seven-eight districts.

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