Logging out from Andhra Pradesh… and into Gujarat

Business growth has virtually come to a standstill in Andhra Pradesh, wracked by political turmoil amid a renewed agitation for a separate state of Telangana. “I know a few companies in Andhra Pradesh who have stalled their expansion plans,” said Shanto Ghosh, principal economist, Deloitte, India. “There is fear among industrialists, especially in the IT and BPO sectors.”

The smaller information technology companies have borne the brunt of the instability. They have not only been losing out on orders, but also face cancellation of existing contracts, with investors shying away from the state. Several of them are shifting base to Gujarat.

Although the situation in Karnataka has not reached such a pass yet, companies based in Bangalore are looking at Tier II and Tier III cities to expand their business, because smaller towns are seen to be insulated from the political tremors in the state capital.

“But even in Tier II locations, business is not insulated from the chaotic government situation,” said Subroto Bagchi, vice-chairman of MindTree.

The BJP government in Karnataka has faced scandals galore from corruption charges to land scams. In the midst of all this, major economic decisions have been put on the backburner while Karnataka chief minister BS Yeddyurappa tries to save his government.

Similarly, in Andhra Pradesh, violent protests to demand a separate state have stalled a slew of projects in the Visakhapatnam-Kakinada corridor. Projects proposed during YS Rajasekhara Reddy’s regime have yet to take off more than a year after his death.