Implosion (50 page)

The Congress had traditionally had strong support in the Telangana region since Nehru’s government ousted the Nizam, but that was dissipated by the way the party’s national leadership mishandled both the separate state issue and Jagan Reddy’s claim to his father’s mantle. It broke the party’s hold on the state, which is politically important because Andhra is often a key player in national coalition politics. The state-based Telugu Desam Party, led by Chandrababu Naidu, who was chief minister from 1995 to 2004, had such a big stake in the 1998–2004 BJP-led government that Naidu was the coalition’s chief co-ordinator in Delhi. The state also contributed 30-odd MPs to the two Congress-led national coalitions in 2004 and 2009. After Jagan (and his mother, YSR’s widow) broke from the Congress and formed the YSR Congress in 2011,
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the Congress was badly defeated in state assembly by-elections with Jagan’s YSR party winning 15 seats.

Eventually, in August 2013, the government started the constitutional procedure to set up a separate Telangana state, probably with Hyderabad as its joint capital for ten years. It did this not through a well developed strategy based on sound principles of regional government but simply because the Congress hoped that the decision would strengthen its support base in the 2014 general election. The plan backfired, however and led to political, industrial and social unrest as Jagan Reddy and others encouraged strikes that shut down power supplies, closed schools and took buses off the roads in various parts of the state.

Business

The main business communities involved in the flow of investment into what became a booming metropolis are the Reddys, Rajus and Raos, besides the Kammas, Komatis and Kapus. They all come from coastal Andhra or Rayalaseema, an adjacent under-developed region. Some of these communities have also settled in nearby states – Reddys in particular have gone to both Tamil Nadu and Karnataka. Several invested in the now famous Telugu film industry that originated in Madras, now Chennai, the state capital of Tamil Nadu.

Hyderabad’s urban growth took off when Chandrababu Naidu successfully turned it into an international information technology centre. Naidu had become chief minister in 1995 after staging a party coup that ousted his father-in-law, N.T. Rama Rao, a famous and colourful film-star-turned-politician. One of India’s most focused younger state leaders, Naidu picked on software development to be Andhra’s growth engine because it involved relatively low capital investment and had short lead times that enabled start-ups to begin operations quickly. It also had a faster multiplier effect than other industries because it raised the state’s international profile by attracting big names such as Microsoft, followed later by Google, Facebook and many others to the new high-tech city.

‘Here you can hire 50 good people in two or three months instead of a minimum of six months in the US,’ Srini Koppulu, an Indian-born executive from the US told me in 2000 when I interviewed him for a
Fortune
magazine article.
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Microsoft had sent Koppulu to Hyderabad to run its new research centre. Entrepreneurial overseas Indians, who had been running software companies in the US and elsewhere, also returned to tap local resources. ‘The time to market is a key component in the dot.com business,’ said Prasad Yenigalla, founder of California-based Magma Solutions, who had 35 employees in Hyderabad writing software to designs prepared by his US company. ‘Here we can get new staff fast enough to build a portal in two to three months compared with six to nine months in the US, and we can do for $250,000 what would cost $1m in the US,’ The number of units registered in Hyderabad’s Software Technology Park rose from seven in 1991–92 to over 1,405 in 2004 and software exports rose from Rs 200,000 to Rs 180bn.
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To support this initiative and utilize the region’s adept brainpower, Naidu set up various high-technology institutes and 180 engineering colleges (allegedly leaking their locations to friendly businessmen who bought land at nominal prices before announcements were made). One of his biggest coups was persuading the internationally recognized and supported Indian School of Business to set up in Hyderabad in the late 1990s. Previously there had been little large-scale industrial development apart from some public sector technology-based corporations that would never by themselves have become engines of economic growth. They now became significant because they helped provide a base for both the IT businesses and defence-oriented establishments plus a growing pharmaceutical industry.

The Electronics Corporation of India, which was set up in 1967, specialises in electronics for nuclear, space and defence industries, and Bharat Dynamics, established in 1970, develops guided weapon systems. These corporations have been the catalysts for a string of allied missile and defence research establishments. Hyderabad’s other main industry is pharmaceuticals. It originated with the public sector Indian Drugs and Pharmaceuticals that was set up in 1961 to fulfil Nehru’s (understandable) belief that there was ‘far too much exploitation of the public in this industry’ so the private sector should not be allowed to dominate.
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Despite Nehru’s view, IDPL’s main contribution has been to spawn an extensive private sector industry, led by Dr Reddy’s Laboratories, which was founded in 1984 by a former chemical engineer employee, Kallam Anji Reddy, and is one of India’s leading pharmaceutical companies.

Naidu lost power in 2004, primarily because he focused too much on urban and technological development, and on extensive personal globetrotting and international publicity. This bred resentment in problem-ridden rural areas, and made him vulnerable politically. He was accused of ignoring rural development, and large numbers of farmers hit by heavy debt and other problems committed suicide. The rural landscape was in a shambles, wrote P. Sainath, a journalist and rural affairs expert, in 2004.
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‘Agricultural credit and finance systems have collapsed. Taking their place are new entities [microcredit schemes] that can make the village moneylender seem relatively less coercive. Prices have pushed most inputs beyond the reach of the small farmer. For many, a move from food crops to cash crops proved fatal. In some cases, the shift was towards high-outlay, water-guzzling crops such as sugar cane. All this, in an era of huge power tariff hikes. A steady shrinking of local democracy further deepened the chaos.’

YSR and Jagan

Y.S. Rajasekhara Reddy became a member of the Andhra Pradesh state assembly in 1978 when he was just 29 and, after a spell as a minister, was made Congress state chief in 1984 by Rajiv Gandhi, then the Congress prime minister and party leader. He fell out of favour when Narasimha Rao was prime minister (1991–96), but later bounced back. When he defeated Naidu and led the Congress party to victory in May 2004, he took over a state that had developed markedly during Naidu’s nine years in terms of industrial and high technology. Economic growth was around 9 per cent in 2003–04, up from 5.6 per cent in 1994–95,
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but the rural and agricultural economy was suffering badly.
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Learning from Naidu’s failures, YSR introduced programmes to help the poor and boosted growth to a peak of around 12 per cent in 2007–08, falling to near 7 per cent in 2008–09.

He proved himself to be one of India’s most skilful regional politicians, seemingly working for the good of the state and the rural poor, while building himself an unassailable Congress power base by providing the Gandhi family with strong loyalty and support. That won him a comfortable re-election victory five months before he was killed, despite reports of widespread corruption and corporate cronyism that had been circulating about him and his son Jagan for some time. There were allegations of nepotism, with friends and relatives being allotted land far below market prices and also being informed about infrastructure projects in advance so that they could buy the land at low prices
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(a frequent ploy in many states).

YSR’s significance was demonstrated by the huge mass of mourners – from Sonia Gandhi and Manmohan Singh to the rural poor – who gathered to pay their last respects at his funeral.
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Large crowds are often assembled in India by political parties and other interests, so it can be difficult to assess the extent of real grief on such occasions. There were, for example, vastly exaggerated reports of suicides and heart attacks around the state just after YSR was killed – some party officials were reported to be claiming, almost certainly bogusly, that a total of over 400 people had died.
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Families were paid Rs 5,000 by local Congress politicians to hide the real cause of their relatives’ deaths, according to local reports.
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Temples were quickly erected to honour YSR. ‘Some see the temples as desperate measures of sycophants keen to score brownie points with YSR’s son Jaganmohan Reddy – others say the temples immortalise the man they worshipped,’ said the
Mail Today
.
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There were two distinct views of YSR’s time as chief minister. Admirers are typified by ‘Shanti S’, who wrote a comment on my blog in December 2009, saying: ‘Every time I return to visit my relatives in Kurnool, I am touched by the programs YSR put in place for the poor. People can allege all they want, they have to also rationalize that progress at the very poor segments cannot come about just driven by greed – the leaders have to have some vision, which YSR had. The state was on a decent growth trajectory & I would take that over politicians who hoarded their coffers, paving the roads to their homes with gold and leaving absolutely no trace of the benefits of their power on the poor & neglected. I despair that we don’t have anyone to fill his shoes now’.
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This was despite the fact that Jagan’s personal wealth was rocketing. Income-tax returns before the 2004 elections showed he had assets of Rs 9.18 lakh and the total value of family assets declared by YSR during the 2004 elections was only Rs 50 lakh. Jagan’s declared wealth shot up to Rs 77 crore at the 2009 election, and a massive Rs 365 crore in 2011.
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Opponents’ views have been evocatively summarized by Kancha Ilaiah, a social activist, writer and political science professor at Hyderabad’s Osmania University. ‘Money was mobilised like water and was distributed through various channels like water,’ he told me, echoing the banker that Anvar Alikhan had mentioned. During YSR’s rule in Andhra, Ilaiah wrote: ‘Private palaces were built for the family use. Thousands of acres of land were given to private industrialists. His [YSR’s] family started various industries, media networks and money was mobilised into those companies from the industrialists who took land, minerals, water, power, etc. from the state without giving anything to the state. The state resources were just plundered ... No dissent and difference of opinion was allowed to exist within the state structure.’
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This was ‘accumulation of private “property as theft”, relocating the French experience of Proudhon’s time (1840s). When Proudhon wrote his book,
What Is Property?
the French monarchs were robbing the state resources for palace building and luxury living.’

Congress Benefits

The allegations of corruption, along with reports suggesting there were handsome payments to the Congress party nationally, were secondary to YSR’s mass popularity. Indeed, if YSR had lived, it is reasonable to assume that the projects, corruption, kickbacks and funding would still be continuing today, with grateful Congress party leaders in Delhi doting on their loyal and valuable friend. No doubt there would have been more corruption allegations against him, and some deals would have been the subject of inquiries and could have come unstuck, but it is unlikely there would have been any major police investigations. Taking that a stage further, if Jagan had not tried immediately after his father’s death to become the chief minister, the subsequent crisis might have been averted and he would not have been in jail three years later, accused of massive corruption.
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And if Sonia Gandhi and the Congress party had handled his succession bid more adeptly, it would not have suffered the drubbing from Jagan’s breakaway YSR Congress party in June 2012, and the official moves to form a Telangana state might not have been needed in 2013.

Sonia Gandhi and her fellow national party leaders appear to have done nothing during YSR’s rule to stop the corrupt deals, even though they would have been fully aware of them. There were reports that YSR was ‘sending huge sums of money for the Congress in Delhi every month in the name of “organisational expenses”.
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Yet, when it suited them politically, they picked on Jagan. The CBI only began to investigate his activities when he became a serious political problem for Congress nationally, and it then put him in jail just before the 2012 by-elections (exposing how governments manipulate the agency for political ends). It is hard to believe that 39-year-old Jagan’s jailing
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was not intended to remove him, as it did, from canvassing in the run-up to the elections that took place shortly after. A leading Indian business newspaper commented: ‘While Mr Reddy may certainly turn out to be guilty, that the CBI has woken up to the strength of the case against him just as his party is in a position to threaten the Congress politically will strike many as further proof that India’s premier investigative agency can no longer even pretend to independence’.
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