Andhra Pradesh, a rising industrial powerhouse, crumbles under the YS Jagan regime

Rammohan Naidu Kinjarapu
7 min readSep 25, 2020

1st in EoDB Rankings for 2018–19, AP 20th in Export Performance 2019–20

On September 5, the latest Ease of Doing Business rankings released by our Finance Minister Nirmala Sitharaman for reforms done in 2018–19 under the Business Reform Action Plan. Andhra Pradesh topped the rankings again, for the third year in a row. On August 26, NITI Aayog released the Export Preparedness Index, comparing the performances of Indian states in 2019–20. AP found itself at the 20th position, ahead of mostly small landlocked states like Meghalaya and Sikkim. These contrasting rankings of Andhra’s performance in 2018–19 and 2019–20 are a window into two hugely different kinds of governance in these years. Where did we go wrong?

We have known for long that Andhra has natural advantages that few other states in India have; that it has the second longest coastline; that it has dozens of major and minor ports all along its coastline from Vizag to Krishnapatnam; that Vizag is the busiest port in South India ahead of even Mumbai and Chennai; that the state was one of the lynchpins of India’s Act East initiative towards SouthEast Asia. Our Ease of Doing Business Rankings since 2015 reflect a willingness to leverage such advantages through reforms in civil administration and markets. But the Export Performance report indicates how the government lost its way in 2019. There has been a drastic rise in unease of doing business owing to the current government questioning all pre-existing commitments and contracts.

MGNREGA works in Kadapa
MGNREGA works in Kadapa

Across India, Andhra had the highest MGNREGA works this year (upto September 16, 2020). Despite a population of only 5 crore, AP having India’s highest works under this employment generation programme reflects mass unemployment in urban and rural areas. AP has historically been very good at implementing NREGA. But if we look at the value of works involved (Rs. 7088 crore), it is clear that good implementation doesn't fully explain why AP accounts for such a huge amount. This is in comparison to much bigger states with far higher unemployment in North India. In fact, robust implementation is what might have been the crucial factor in ensuring that the jobless don't go hungry in Andhra. MGNREGA being the last resort for the unemployed, there was a strong system in place to mop up all the unemployed.

Though the pandemic-induced slowdown is partly to blame, this also indicates an erosion of AP’s underlying economic strengths in the past year. From being a highlight of India’s growth story since 2014, we are fast becoming its latest failure. AP was at the forefront of solving India’s decades-old dilemma — how to shift millions of individuals from low-paying primary sector to better-paying secondary & tertiary sectors, i.e, industries, manufacturing and services? But now, it is a lesson on how not to sacrifice governance and growth policies for political one-upmanship.

From agrarian to industrial economy
The trajectory of every prosperous country in the world, whether USA, Germany, China or South Korea, follows a similar path. Once predominantly agrarian countries with rising populations, the only way you could provide quality jobs to millions of youth was by becoming an industrial powerhouse. India itself is struggling to make this transition with half its workforce still dependent on agriculture even as millions youth join its workforce every year. ‘Make in India’ was a manifestation of this need to build our states into industrial economies. Though a fledgling state, Andhra Pradesh ably took up this challenge under the TDP government. Before elections in 2014, we promised a job in every family through sustainable industrial growth.

We first ensured that the state’s agrarian economy was well-provided for in every way. For the long term, we embarked on a path to industrialization as agriculture simply could not provide economic mobility for our increasing workforce. Our aims were three-fold. First, provide jobs for lakhs of youth shifting away from agriculture or newly joining the labor force. Second, ensure that all regions and districts gain new industries and investments. Three, create a favorable infrastructure for investors to feel confident about building a business in AP. Here we had to compete with Tamil Nadu and Karnataka with long-term progress in industries, investments and services.

Rather than dwelling on the policies and processes that we worked on to accomplish these aims, I will let the results speak for themselves. To measure nation-wide quality and quantity of jobs, Just Jobs Network and Centre for Policy Research analysed NSSO and Labour Bureau surveys, ASI and RBI figures, and PLFS data. Their 2019 report, the Just Jobs Index, showed Andhra topping India in overall performance. It scored especially well in terms of creating employment and keeping unemployment rates low, in providing benefits to its workers through a robust welfare state, and in terms of gender equality. This was complemented by consistently topping India’s Ease of Doing Business Rankings, thus reflecting the strength of its human, physical, and administrative infrastructure for potential businesses from across India and the world.

With such structural strengths, we successfully convinced the CII (Confederation of Indian Industries) to hold three consecutive Partnerships summits in Vizag between 2016–2018. More than 1100 MoUs worth 19.6 lakh crores were signed. Nearly a third of these were actualised on ground. These conferences were only the highlight of several such pioneering events to utilize and inspire latent entrepreneurial energies within Andhra Pradesh. Being entirely transparent on the status of these and many other MoUs, an investment tracker was set up online for public viewing. Between 2016–18, 2299 projects worth ₹16.7 lakh crores were under various stages of implementation with an employment potential of 34.7 lakh jobs. Of these, 1065 projects worth ₹3.5 lakh+ crores able to employ 5 lakh+ people commenced production or erected machinery. More projects worth another ₹13 lakh crore are under various stages of construction or approval.

We oversaw industries worth hundreds and thousands of crores by reputed companies dispersed all across Andhra. Kia and Hyundai built in Anantapur; Foxconn, Isuzu, and Apollo in Chittoor; Kurnool and Kadapa saw Asia’s then largest solar parks taking shape; Nellore saw Aurobindo Pharma, Gamesa and Sembcorp; Srikakulam saw Reddy Labs while prominent companies such as Hinduja, Asian Paints, Rashtriya Ispat and Pfizer begin production in Vizag. Reviewing projects established from MoUs signed between 2016–2018, 930 projects worth nearly ₹1.75 lakh crores began production by May 2019. In terms of value, more than half of these (59%) were in Rayalaseema and more than a fifth in North Andhra. Prakasam and Nellore districts accounted for 9.9% with the predominantly agrarian Krishna-Godavari region accounting for the rest (10.6%). In 2013–14, undivided Andhra Pradesh had exports of ₹92,000 crores. Remarkably, the new Andhra Pradesh topped this with exports of ₹98,000 crores in 2018–19.

‘Profit is a dirty word’
When power changed in hands in 2019, there was an expectation from the current government to continue building on the momentum generated by the TDP government in attracting investments and building industries. What transpired is a policy paralysis and a reverse flow of domestic investments and FDI equities. As NITI Aayog pointed out in its export performance index, “AP’s performance remains poor… due to lack of policy measures.” MoUs were cancelled, companies were hounded out of the state, existing contracts were dragged to courts or subjected to quasi-judicial review commissions in a move reminiscent of the license-permit raj. The World Bank and AIIB pulled out of planned loans worth half a billion dollars. So did the Singapore Consortium. From their statements, it was evident that the current government simply didn’t see this kind of industrialization as a priority.

This created an atmosphere of great uncertainty which is anathema for businesses looking to invest and make profits. Major companies such as LuLu and Adani pulled out of their projects in Vizag. Inaction on the government’s part led to Chittoor losing an ambitious Reliance electronics hub. This was a pattern repeated all across the state as the government began to ascribe ulterior motives to each and every company’s actions. Nehru once remarked of how profit is a dirty word for him. Conforming to that socialist reflex of perennially doubting the private sector, AP began haemorrhaging investments and companies throughout the past 15 months. Specifically referring to the government’s actions, commerce minister Piyush Goyal remarked on how the Centre was forced to consider legislating bills to protect investments from state harassment.

From being the highlight of India’s growth story, Andhra has now become one of its problem states, a warning to international and national companies. Other government failures such as banning sand mining for 3 months, subjecting prior agreements to reverse tendering, and creating legal hurdles has resulted in crippling GST revenues. What we are seeing now is a vendetta against any and all initiatives of Chandrababu Naidu by the present Chief Minister. In being obsessed with rewriting legacies rather than building on them, YS Jagan threatens to undo all the gains, lakhs of jobs, and prosperity that follows the industrialization of Andhra Pradesh.

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Rammohan Naidu Kinjarapu

2-time MP, Srikakulam Constituency | National General Secretary, Telugu Desam Party