Will decision-scrapping spree hurt Andhra economy?

Hyderabad, Aug 22 (IANS) The scrapping of some tenders by Jagan Reddy government in Andhra Pradesh and review of all decisions taken by the previous TDP government has put a pause on work on all major projects, raising fears of its impact on the state economy.

Ever since the state went into election mode in March, work on various components of developing the capital city Amaravati and mega irrigation project Polavaram slowed down.

After YSRCP stormed to power with a massive majority and announced review of all decisions of Chandrababu Naidu government, construction activity came to a grinding halt.

It was a setback for a cash-strapped state, still reeling under the impact of bifurcation as all the development plans over last five years had mostly revolved around Amaravati.

While Rs 58,000 crore Polavaram is national project under Andhra Pradesh Reorganisation Act 2014 and is being funded by the Centre and executed by the state, the Centre had also assured financial assistance for development of Amaravati on the banks of Krishna river near Vijayawada.

As per the grand plans drawn by Chandrababu Naidu, development of Amaravati in three phases requires a whopping Rs 1.5 lakh crore. Works valued Rs.38,000 crore were on when the election schedule was announced.

The termination of a contract for one of the works of Polavaram by the new government and its review of the contracts awarded for Amaravati created uncertainty and sparked apprehensions among the investor community.

Analyst Telakapalli Ravi says that the new government's move has started affecting the investment climate. "In globalisation era, investors put many demands and pressures and they are also making states compete each other. So they are looking this as a big brake and for some this is a shock," he said.

"Reverse tendering might immediately not scare away investors but it will reduce the trust factor due to lack of policy continuity," feels another analyst P.Raghava Reddy.

The state with a public debt of nearly Rs 2.59 lakh crore is already spending Rs 40,000 crore annually on debt servicing.

The resource gap is likely to expand further with new sops announced by YSRCP government over last two-and-half months requiring nearly Rs.50,000 crore.

TDP leader and former minister Somireddy Chandramohan Reddy believes that the uncertainty created by the government's moves will hurt the state's economy.

"The state stood first in the country with a growth rate of 10.5 per cent for four years from 2014. With everything at a standstill for last five months, the growth rate is sure to take a plunge," he told IANS.

Ruling YSRCP, however, sees no impact on investment or economy. "We are trying to set right the things and bring transparency. Once we complete this exercise, the state will attract more investment," said YSRCP spokesman Ambati Rambabu.