Despite the political dagger that has been threatening to carve the state into two, Andhra Pradesh continues to post good industrial growth, especially in the fields of information technology exports and food

Huned Contractor

If a city's prosperity has to be reckoned by the state of its airport, Hyderabad would surely come up trumps. The Rajiv Gandhi International Airport, a creation of GMR Hyderabad International Airport Limited (GHIAL), stands testimony to the successful partnership between India's public and private sectors. To execute this state-of-the-art project, GHIAL leveraged the experience of GMR Group, the technical and operational expertise of Malaysia Airports Holdings Berhad (MAHB) and the institutional support of the Government of Andhra Pradesh and the Airports Authority of India, leading to an infrastructural facility that can now compare with the best airports of the world.

This renovation has also resulted in quantitative growth. Ten years ago, in 2002-03, the annual total domestic and international passenger traffic at the airport was 19,10,189 which has jumped to 83,66,731 in 2012-13 while the cargo movement has shot up from 20,728 to 83,994 tonnes in the same ten-year period. "It is all due to the state of Andhra Pradesh finding its niche in several sectors and primarily being recognised as a hub for information technology," says Harsha Rao, a finance expert who has been shuttling between Singapore and Hyderabad for the past decade.

In fact, there is more good news for Hyderabad's growth in the IT sector with the city having been granted approval as an Information Technology Investment Region (ITIR). Explaining that the Information Technology & Communications (IT&C) Department has appointed Ernst and Young as consultant for the project, its deputy director of promotions, Syed Shawket H M, said the department is now collecting data on land, power, water and other infrastructure for the project. He said the ITIR requires 40 sq.km of land, out of which 40 per cent will be the processing zone comprising IT units and 60 per cent would be the non-processing zone comprising housing, greens and supporting industries.

Despite years of political uncertainty, Andhra Pradesh has been able to post good growth in the IT industry with total revenues of Rs 64,354 crore in the financial year 2012-13 as against Rs 53,246 crore in the previous year. Of this, exports stood at Rs 51,285 crore, showing a growth of 26.1 per cent over last year's exports of Rs 40,646 crore. "Our share in the national IT exports has slightly increased to 12.5 per cent in 2012-13 from 12.4 per cent in the previous year. This proves that Andhra Pradesh has not lost the momentum when it comes to growth in the IT industry," Ponnala Lakshmaiah, Andhra Pradesh Minister for Information Technology and Communications, said. He also turned down allegations that said political agitations, for and against the bifurcation of the state, had an adverse impact on employment generation. The number of IT companies operating in the state went up to 1,268 last year against 1,157 in 2011 and 1,074 in the year before.

Fresh Investments

And so even as the state's IT status grows in stature, its secondary channel of revenue - agriculture and packaged food - continues to do well too. The latest on this front is that beverages and snacks major PepsiCo India will invest over Rs 1,200 crore to build a new beverage manufacturing facility in Sri City, which upon completion will be PepsiCo's largest beverage plant in India. A statement released by the company states, "PepsiCo's investment in the new plant is part of the recently announced plans by the company and its partners to invest Rs 33,000 crore in India by 2020." The company also announced plans to substantially increase sourcing of mango pulp from Andhra Pradesh in the next six years.

Commenting on the development, PepsiCo India Chairman and CEO D Shivakumar said, "Sri City is ideally located and offers the perfect opportunity to harness the benefits of superior connectivity, great infrastructure and an ample talent pool, which are the prerequisites for every industry." The plant will manufacture a range of beverages, including fruit juice-based drinks, carbonated soft drinks and sports drinks. Welcoming PepsiCo's investment in the state, Andhra Pradesh Chief Minister N Kiran Kumar Reddy said, "The proposed plant will be completed in three phases and once fully operational, the plant will provide direct and indirect employment to over 8,000 people." PepsiCo India already has a beverage manufacturing plant at Sangareddy in Andhra Pradesh.

Meanwhile, Cadbury India signed a memorandum of understanding with the Andhra Pradesh government in November 2013 to set up a chocolate manufacturing facility at Sri City Special Economic Zone in the Chittoor district. "Spread across 134 acre, it will be the company's largest manufacturing facility in the Asia-Pacific region," Manu Anand, Managing Director, Cadbury India, informed the media. He expects the first phase of the project to be completed by mid-2015. Cadbury India will invest Rs 1,000 crore and produce around 1,00,000 tonnes of Cadbury chocolates annually. "The plant will ultimately have an annual capacity of 2,50,000 tonnes and directly employ 1,600 people," he added.

According to Chief Minister N Kiran Kumar Reddy, who spoke at the MoU signing ceremony, the project would also benefit about 4,00,000 farmers in the region as it will need about 5,00,000 litres of milk and 100 tonnes of sugar per day. The Andhra Pradesh unit will be Cadbury India's seventh manufacturing facility in India. As such, the focus of the state government is certainly centred on increasing the revenue share derived from its agriculture and food sector. In fact, to increase the shelf life and exports of agricultural and other food products, a slew of measures are under way, as was recently announced by Agricultural and Processed Food Products Export Development Authority's Deputy General Manager T Sudhakar.

Addressing a press conference, he said five infrastructure projects worth Rs 50 crore were in the pipeline to facilitate exports from the state. They include enhancing infrastructure facilities for shipping at the Kakinada port; construction of a warehouse at the Krishnapatnam seaport; establishing a centre for perishable cargo at the Visakhapatnam airport; a vegetable cluster at Kandi village in Medak district to increase productivity and finding an easy market; and an inland container depot in Chittoor district. The financial assistance for these projects will be provided by the Union Ministry of Commerce which heads APEDA. "We would like to revise the subsidy doled out to exporters in relation to transportation and cold storage from 25 to 40 per cent from 2014," he said.

Talking about the total income accrued from exports in the last financial year, B Madhav Reddy, a member of APEDA, said it received Rs 1.20 lakh crore and expected it to increase this year. "We are expecting our exports to increase and we have set a target of Rs 1.75 lakh crore for 2013-14. In the first quarter of the current financial year we have netted an income of Rs 50,000 crore," he informed.

This growth in the agriculture and food sector will no doubt be helped by the state claiming a lion's share in the country's irrigation sector investments in the last decade. According to a study titled 'Sectoral Investments and Growth: Unravelling the Investment Story of States' by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the state attracted maximum investments in the irrigation sector worth over Rs 1,47,000 crore as of March 2013. The state accounted for 39 per cent of the total investment of Rs 3,70,000 crore that was registered in the country's irrigation sector between 2003-2013, the study said. The report compiled the data of 20 Indian states.

To take the larger picture into consideration, of the total investments worth over Rs 12 lakh crore attracted by Andhra Pradesh last year, the power sector accounted for the maximum share of 25.6 per cent closely followed by manufacturing (24.7 per cent), services (20.7 per cent), irrigation (12.2 per cent), real estate (11.9 per cent) and mining (4.7 per cent), said D S Rawat, Secretary General, ASSOCHAM. "Andhra Pradesh accounts for 10 per cent share in total investments attracted from various public and private sources across India. So far as sector-wise share of investments is concerned, Andhra Pradesh has about 39 per cent share in investments attracted by the irrigation sector throughout India, 10 per cent share in manufacturing, 16 per cent share in mining, 7 per cent in power, 9 per cent in services and 10 per cent in real estate investments," Rawat said.

Challenges Too

However, though Andhra Pradesh recorded industrial growth at 0.73 per cent in 2012-13, this was believed to have touched rock bottom. The primary reason attributed to this record low growth is the power crisis. The industrial sector has been reeling under severe power cuts for the past 18 months with utilities imposing a power holiday of 3-4 days in a week. A steep dip in natural gas production in the KG basin has further aggravated this demand-supply mismatch. As such, the industrial growth is the lowest in the past nine years, reflecting a sharp fall from a growth of 7.71 per cent in the previous year.

Industry bodies such as the Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI) have openly blamed the state government for mishandling the power sector. However, to tackle the state's power crisis, AP Genco expects to add 2,200 MW within 12 months and another 1,200 MW is likely from the private sector. In addition, solar and wind energy sectors are likely to augment capacity.

This is the second consecutive year that the state is going through a 2 percentage point decline in GSDP (gross state domestic product) growth from 9.66 per cent in 2010-11 (revised estimates) to 7.82 in 2011-12 and to the estimated 5.29 per cent for the current year. The GSDP growth for 2012-13, however, is a tad better compared with 4.53 per cent in 2009-10 on the back of a slight recovery in the agriculture sector. The standalone growth in the agriculture sector is estimated at 1.96 per cent as compared with 0.78 per cent growth in the last year (2011-12). The revival mostly comes from allied sectors like fisheries and animal husbandry, according to the officials.

Emerging Area

So, even as the sectors of IT and food continue to save the state from getting into negative figures because of power and political hiccups, an additional sector that is slated to become a top player is biotechnology. From the day it played host to the first biotechnology company to produce a locally developed recombinant DNA-derived healthcare product in 1997 - the Hepatitis B vaccine - Andhra Pradesh, known for its pharmaceutical production, has come a long way to become the biopharmaceutical capital of India. The Genome Valley cluster currently houses about 200 biotech research, training and manufacturing units supported by world-class infrastructure while another 200 units are spread in different parts of the state. A couple of lakh square feet area in the Genome Valley is exclusively dedicated for the laboratory space.

Home to leading names like Shantha Biotech, Bharat Bio and GVK Biosciences, the state's biotechnology industry also gets support from numerous research institutions such as the prestigious Centre for Cellular and Molecular Biology (CCMB), National Institute of Nutrition (NIN), ICRISAT, Centre for DNA Fingerprinting and Diagnostics (CDFD), Directorate of Rice Research (DRR) and others which provide access to high-level talent to industry and teaching institutions.

Political Status

Finally though, when it comes to any discussion about Andhra Pradesh, the biggest issue is its current political scenario. The big question is whether the state will get divided into two, thereby impacting its industrial growth. In this case, the latest development, as reported by the media, is that the YSR Congress MPs, MLAs and MLCs have submitted affidavits to President Pranab Mukherjee opposing the division of Andhra Pradesh. YSRCP's president, Y S Jaganmohan Reddy, who led a party delegation to the president, told reporters later that three MPs, 23 MLAs and five MLCs of YSRCP had given affidavits with the request to keep the state united. The draft bill for division of Andhra Pradesh is presently under the consideration of the state legislature.

A Sparkling Future?

But even as the political crisis continues to swing from one extreme to the other, an exciting discovery has put Andhra Pradesh in the limelight. According to new research by geologists Subrata Das Sharma and Durbha Sai Ramesh of the National Geophysical Research Institute (NGRE) in Hyderabad, there could be a huge diamond field in a wide swathe under the earth's crust across Andhra Pradesh and Tamil Nadu. They have suggested that a vast area in southeast India - 2,00,000 sq.km - could contain diamond-bearing rocks in a report published in the August issue of 'Lithosphere', the peer-reviewed journal of the Geological Society of America. While all this is very preliminary in nature, the findings could potentially bring cheer to the country's diamond traders and exporters who otherwise have to depend on supplies of rough stones from Botswana, Namibia, South Africa, Russia, Canada and Australia.