Saturday, December 20, 2014

APT (Andhra Pradesh – Telangana) Model of Development: Apt for the Whole of India?

‎Ever since the constitutional division of Andhra Pradesh took place early this year in June 2014 with the carving out of a separate State of Telangana, an interesting competitive battle of development aspirations has been going on between the Government of Andhra Pradesh (GoAP) and the Government of Telangana (GoT). This battle is based on models of economic development being pursued by the respective governments. Although appearing to be competitive, the two models actually reflect a single integrated model that has socio-economic development ramifications for India as a whole. This blog post names this model as the APT Model of Development (APT being an abbreviation of Andhra Pradesh - Telangana)‎ and examines if the APT model is also apt for the nation at a macro level.

With the formation of the State of Telangana, India has 29 States and 7 Union Territories. The organization of India into several States based largely on linguistic and micro-ethnic considerations got challenged as a concept in November 2000 with the carving out of certain regions of the large States of Uttar Pradesh, Madhya Pradesh and Bihar into the States of Uttaranchal (later renamed as Uttarakhand), Chhattisgarh and Jharkhand, leaving the residual states as well in each case. The linguistic basis has been challenged even more with the recent AP and Telangana division. Some believe that this trend towards smaller States could continue in future. Political considerations apart, the APT division brings out an economic model of development that needs to be understood better in the Indian context.

Aspirational icons

The APT model has been driven by developmental aspirations and political expressions thereof. The respective Chief Ministers, Nara Chandrababu Naidu (NCN) of Andhra Pradesh and K Chandrasekhara Rao (KCR) of Telangana became iconic leaders aspiring for, and articulating, transformational change in the two States. NCN and KCR have been aggressive in talking about development and welfare schemes almost on a daily basis. Given the natural endowments on one hand and the development deficit on the other in the residual AP, NCN has felt inspired to conceptualise more schemes than his counterpart. In fact, he calls the State of AP as the Sunrise State. Some of his aspirations have been economically compelling as well as financially audacious; development of a chain of 12 ports on the Eastern Bay of Bengal corridor, creation of a new super capital in the Guntur-Vijayawada region, development of multiple smart city, metro rail and airport projects, for example. 

Although having Hyderabad as the continuing capital, business hub and wealth generator, KCR does not wish to rest on the past laurels either. He has dreams of a magnificent Hyderabad with the world's tallest tower and a host of skyscrapers around the Hussain Sagar Lake, establishment of a new pharma city and development of multiple industrial parks in and around Hyderabad. On the development front, both the Chief
Ministers are committed to write off the loans of indigent farmers (this being their principal election plank) and provide a host of updated welfare schemes (health and water, for example). AP has since tasted some success in securing some greenfield manufacturing projects in the largely agrarian regions (eg., Hero Motor project) while Telangana is hoping to build on its strong business and industrial base (eg., Amazon in Hyderabad). Clearly, both the CMs are leaving no stone unturned to keep developmental aspirations high on people's agenda.

Development passion

This aspiration-articulation model is a sort of role reversal for the traditional polity. For the first time, super-projects of a mega scale are being talked about, almost on a daily basis. Also, for the first time, silent functioning on electoral promises has been replaced by articulate focus on the promises made, and more. Apart from the traditional “look towards the Centre” approach for funds the two States have been trying to directly canvas with developed nations like Singapore and Japan (and industries therein) for development of super-projects in the States. AP even wants China to look at a bullet train project for the State. Part of this new approach may be attributed to the desire of the NDA Government at Centre to enable greater financial and economic devolution to the States. That by itself does not take away the merit of the self-inspired passion for development that the leaders are projecting.

Development is at the centre stage of political debate and economic governance in the New India. ‎ The programmes, projects and schemes announced by the Prime Minister Narendra Modi such as Make in India, 100 Smart Cities, Jan-Dhan Yojana, Swatch Bharat have led to a new renaissance in economic thinking as a driver of political consolidation. However, at the APT level, development has assumed greater focus and urgency given the local issues and higher visibility (of either performance or non-performance). There is an effort to implement in five years clearly visible development projects that could support electoral wins in the next elections. This approach is both laudable and self-propelling. Clearly, what does not exist in India but has propelled growth elsewhere (bullet trains, broad band, smart cities, 24X7 power, for example) must come to India but without any disadvantages that have been noticed elsewhere.

From PPP to GTG

The history of economic development in India has started largely in the public (government) sector in the 1950s but moved to public-private partnership from the 1990s. There is, however, a perception that even the private participation is backed only by funding from State-owned ‎banking system (the latest being a plea for bailout of the financially distressed low-cost airliner SpiceJet by Banks!). With the banks already burdened with stressed assets as a result of backing private and public sector infrastructure, the need to find the required resources of mammoth proportions is a huge challenge. If the external diplomacy of the Prime Minister and APT Chief Ministers is an indication, there is a well merited intent to move towards a global Government to Government collaboration to meet the funding needs. All international governments recognize that India is the only emerging market that is set for strong and sustainable growth, which realisation must be leveraged by the Indian governments, Central and States, as a new model of Government to Government (GTG) collaboration.

While the advanced nations may have a lower ability to import and absorb Indian products‎ due to their lower economic growth, they are in need of finding new markets for their infrastructure equipment and capital goods. Bullet trains and metro rails as well as power, mining, drilling and construction equipment are prime examples. India needs to find a new paradigm by which Indian development needs provide a market for such industrial and infrastructure products but are also made in India to the extent possible. The good old phased manufacturing programmes of the 1970s and 1980s that were successful in getting new technologies for the Indian automobile industry need to be revived in an appropriate capital goods format model. Starting with Completely Built Units (CBUs) through Semi-Knocked Down (SKD) to Completely Knocked Down (CKD), phased manufacture is the way to go. However, CBU and SKD imports should be tied to long term interest-free aid, and only CKD imports should be allowed on commercial basis. 

Growth with division

The APT model has certain important lessons, each with latent pointers. The lessons are as follows. Firstly, division of States could lead to a competitive urge for development. Secondly, smaller geography, in each case, could lead to greater governance. Thirdly, natural resources hitherto neglected in a broader State emerge as ready reckoners for development. Fourthly, the development deficit stares at the people more starkly bringing out a greater development urge. Fifthly, the resource crunch brings out novel models of development. Sixthly, people and governments no longer see development merely as a transaction; they would like to remain as long term stakeholders to enjoy fruits of development. Seventhly, politically triggered division could be accompanied by economic sops. These lessons have certain pointers too.

The pointers are as follows. A competitive passion for development need not necessarily wait for a division of the State. For example, even in the erstwhile combined State, building of new capitals (for the regions of coastal Andhra and Rayala Seema) could have been considered. Development of coastal and industrial corridors or new industrial and business hubs should have been as relevant in the undivided State as they are in the divided States. Long term stakeholder concepts could have been part of all development projects (dams, SEZs and capital cities). If Centre had the financial wherewithal to grant new IITs and IIMs post-Division and grant special financial packages, they could be provided even otherwise.  There is a factor, therefore, that is beyond all this that is making the APT Model work despite all the financial challenges. And, that is iconic leadership.

Iconic leadership

In a recent event at Visakhapatnam (“Andhra Talks Business” organized by Fortune India), the Chief Minister of AP unveiled his mission to make AP the best destination in the World in stages. He said that he wanted to make AP one of the three top States in India by 2019, the best State by 2029 and the best destination in the world by 2050. He referred to his characteristic of converting challenges into opportunities and outlined various missions and development projects he had in mind for the State of AP. He also disclosed that various international governments such as Singapore and Japan are keen to collaborate with, and invest in, AP. He also brought out his camping in Visakhapatnam in the wake of Cyclone Hudhud and working ceaselessly with his government agencies and people to restore power, telecommunications, water and food supplies and, more importantly, public confidence in a manner that no national or international Government could do thus far. The progress and success of APT Model and the Sunrise State concept of AP as a preferred global destination will be keenly watched by experts and laymen alike.

India is a land of natural resources and enterprising people. India is peace loving and growth oriented. The developmental aspirations that were triggered, and further unleashed, by the division of Andhra Pradesh into two States of Andhra Pradesh and Telangana are common across all the States of India. India needs every infrastructure and every development that is promised in the APT Development Model by the CMs of AP and Telangana. APT Model of creating new capitals, new smart cities, new industrial hubs, new business districts, new entertainment parks, new coastal corridors, new metro rails, new bullet trains, new power plants, new IITs and IIMs, so on and so forth is indeed apt for the whole of India. It is apt to leverage India’s huge land, water, solar, wind and mineral resources for development. It is also apt for the Governments, Central and State, to consider global governmental collaborations to generate the massive investments and access innovative technologies. However, nothing is more apt than having iconic leadership that is passionate, expressive, committed and diligent about India’s development options. In the overall, the APT Development Model is certainly apt for the whole of India.    

Posted by Dr CB Rao on December 21, 2014    


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