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Q+A: Why the controversy over plans for new India state?
January 5, 2010 / 12:28 PM / in 8 years

Q+A: Why the controversy over plans for new India state?

NEW DELHI (Reuters) - Violent protests for and against carving a new state called Telangana out of India’s Andhra Pradesh have been disrupting life there for weeks.

On Tuesday the federal government postponed a decision to bifurcate the southern state following protests by political parties.

But the postponement itself sparked new protests

Here are some questions and answers about the Telangana crisis and whether it can hurt the ruling Congress party.

WHAT ARE THE PROTESTS ABOUT?

Telangana was part of the princely dominion of Hyderabad and was merged into Andhra Pradesh in 1956. The demand for a separate state is half a century old. Supporters say the interior has been neglected by dominant coastal districts.

A surprise decision by the Congress-led government to support a new state came after a Telangana leader’s fast sparked off protests in Hyderabad, home to firms like Microsoft, Google and Mahindra Satyam.

Supporters of the new Telangana state hailed the decision with firecrackers but those against bifurcating Andhra Pradesh state also took to the streets in protest.

At the heart of the dispute is the status of Hyderabad, geographically within the proposed new state, but claimed by both sides. Opponents of Telangana say the city was built into an economic powerhouse by investments from entrepreneurs from other regions of the state.

WHAT IS LIKELY TO HAPPEN?

As protests continue, the federal government seems to have backpedalled, saying no decision would be taken in haste and it would try to work out a consensus.

While the final decision to create states lies with the federal parliament, a resolution approving the formation of Telangana must be cleared by the state legislature, which is sharply divided on the issue.

The Congress party, which heads the federal government, could cajole its state lawmakers to fall in line with the decision, and try to create a consensus with other parties.

WHAT DOES IT MEAN FOR BUSINESS?

Some investors are concerned business would not be at the top of the new state’s priorities, making Hyderabad a less attractive destination for multinational firms.

They also fret about what sort of labor and tax laws the new state would adopt.

The changed political equations could hit businesses such as real estate and infrastructure firms, many of whom have relied on political ties for their growth.

But Telangana, with few resources of its own, would necessarily have to open up to investors if it is to remain viable and not run on federal aid.

The last three states created in India, in 2000, have generally been pro-business. The world’s largest steelmaker, ArcelorMittal, is building a plant in Jharkhand, and Uttarakhand’s tax breaks have led to many firms starting operations there.

WHAT DOES IT MEAN POLITICALLY?

The sudden acceptance of a long-neglected demand had portrayed the government as giving in to street agitation, coming as it did after officials had also bowed down to sugarcane farmers who laid siege to the Indian capital of New Delhi demanding better prices.

The Gorkhas, ethnic Nepalis in the Himalayan districts of West Bengal state, have restarted their agitation for a separate state, and at least three other movements have been resurrected.

As the government has struggled to contain the fallout, it has had less and less of the time it needs to grapple with other pressing issues like steering the economy into health and reversing a deterioration in security.

Reporting by C.J. Kuncheria and Bappa Majumdar; Editing by Jerry Norton

Our Standards:The Thomson Reuters Trust Principles.
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