Andhra Desperately Needs A Turnaround. Will Chandrababu Naidu Live Up To The Task?

As the euphoria within the National Democratic Alliance (NDA), especially the Telugu Desam Party (TDP), settles down after the formation of the government in Andhra Pradesh, it is time for a reality check.

What Chandrababu Naidu, the new Chief Minister, has inherited is a state left in a poor financial condition by the government of Y S Jagan Mohan Reddy. He thus, has the difficult task of steering the state out of its troubles and taking it forward on the path of economic development, while also fulfilling his own set of 'guarantees'.

The ratio of the debt to gross state domestic product (GSDP) is 33.3 per cent as per the budget estimates for 2023-24. Including off-budget borrowings, the figure rises to 44 per cent.

This is among the highest, when compared to other large states. Only Punjab, Bihar, Bengal, Rajasthan and Kerala are ahead of it.

According to a statement by the special secretary of former chief minister Y S Jagan Mohan Reddy, the state's debt including liabilities not guaranteed by the state government, was Rs 638,217 crore at the end of March 2023.

In November 2023, credit ratings agency CRISIL downgraded bonds issued by the Andhra Pradesh Capital Region Development Authority (APCRDA) due to concerns over "liquidity strain" on the finances of the state government.

In the last five years, Andhra Pradesh fell behind as the focus of the Jagan Mohan Reddy-led YSRCP government was more on welfare schemes and freebies. Neither did many big investments come in nor was there much progress on the construction of the state’s capital(s). This was after the state had already lost the city of Hyderabad — a major source of revenue, to Telangana, after the bifurcation.

Adding to that is the huge amount of expenditure (upto Rs 1.2 trillion annually as per a report by Livemint) that the new government is staring at due to the election promises of the TDP, called ‘Super Six Guarantees’.

Some of the promises are as follows — Rs 1,500 per month to women aged 18-59, free bus travel for women, Rs 15,000 per year for every school-going child and three free gas cylinders per year. 

Naidu, therefore, has his task cut out.

While his ‘kingmaker’ status at the Centre due to the Bharatiya Janata Party (BJP) not having a majority of its own, might ensure that he does not find it difficult to secure a special package from the Narendra Modi government, he has to focus on finishing pending projects on time to prevent further cost escalations and start benefiting from the revenue accrued.

Key projects include the much-awaited capital city project in Amaravati, the Polavaram dam, and the airport at Bhogapuram.

According to a report by News9Live, the cost of the Amaravati project has risen from Rs 21,000 crore estimated by the APCRDA during Naidu’s earlier tenure to Rs 40,000 crore today.

Simultaneously, he has to bring in lot of investments into the state. A focus on manufacturing would be better to begin with as it could be difficult to immediately draw IT companies away from the well-established ecosystem in Hyderabad. The state already has facilities like Sri City, which is a multi-product special economic zone with a dedicated electronics manufacturing zone. 

More such projects can be encouraged, given that there is a favourable climate at a global level, with companies actively looking at India under their China +1 strategy. Domestically too, the Centre is encouraging companies through initiatives like the production-linked incentives (PLI) scheme.

Manufacturing industries would also solve another problem, ie, the lack of job opportunities.

The greatest asset that Andhra Pradesh has is its 972 kilometre long coastline, which can be leveraged to encourage port-led development. A good example to emulate could be the Mundra port in Gujarat, though it is privately owned.

Today, the area is not just about the port. It has a number of industries, ranging from an edible oil plant by Adani-Wilmar, to power plants, aerospace and defence manufacturing and an LNG terminal. 

These could further be aligned to the Visakhapatnam-Chennai Industrial Corridor (VCIC) project, which is part of the larger East Coast Economic Corridor (one of the five industrial corridors being planned by India).

The onus is now on Naidu, often described as the ‘CEO’ of Andhra Pradesh, to deliver. Given his reputation as the man who laid the foundation for transforming Hyderabad into an IT hub, there is hope that he can achieve similar success for Andhra Pradesh.