Andhra Pradesh stares at slowdown after govt applies brakes on Amaravati

An expansive economic slowdown seems to be in store for Andhra Pradesh. This is in part due to the sudden dip in business ever since the state government applied brakes on infrastructure activity in the upcoming capital, Amaravati.

Media reports are doing the rounds about the plight in villages inside the capital city area. They highlighted empty house properties vacated by people employed in these construction projects. Shops dealing with groceries and consumer durables went out of business in the absence of migrants who have now moved out after work stopped, according to reports.

Going by one estimate, over 20,000 people, mostly migrants, were engaged in various projects in the area prior to the change of government earlier this May. This is a big number considering the fact that the total population of the 29 villages falling under the capital city area was just about 1.5 lakh people when the lands were allotted for the capital.
 

The plight, however, isn’t just restricted to people who built extra rooms for rental, or retail businesses that cropped up. Scores of investors have found their money stuck in properties that fail to attract buyers ever since the government said the capital was not a priority anymore.

According to Anarock Property Consultants chairman Anuj Puri, besides developers acquiring land banks in Amaravati, several buyers from Hyderabad, Vijayawada and even NRIs were known to have invested here. The change in guard has impacted prices with few areas seeing a dip in land prices, he said.

Show-rooms selling high-end vehicle brands like Jaguar and Audi were hardly receiving any customers unlike in the past when farmers sold their land for Rs 1 to 2 Rs crore per acre even in the interior parts of the region. The price of these lands was just around Rs 10-20 lakhs per acre prior to the announcement of capital city, according to a local journalist.

After assuming the office on May 30, 2019, chief minister Y S Jagan Mohan Reddy ordered to stop all those capital city-related contracts that have less than 25 per cent progress on the ground. The previous government, headed by N Chandrababu Naidu, issued contracts worth around Rs 40,000 crore, some at the close of its tenure. The work on a majority of these contracts has been stopped as per the new guidelines.

Other decisions such as the review of power purchase agreements(PPAs) of renewable energy projects, cancellation of existing contracts of projects such as Polavaram has further dampened investment activity in the state.

In a recent interview to a Singapore-based newspaper, AP finance minister Buggana Rajendranath, who has been to the island nation to meet the investors, said the state government has no money to spend on Amaravati project. But the first 100 days of the government has passed without any major initiatives to help push the investment activity either in government or in the private sector even outside Amaravati. 

There are projects with funding commitment from the Centre such as the construction of green-field port in Duggarajapatnam. The government has done very little to fast-track at least such projects that would trigger the economic activity, say observers.  

Just as the economic slowdown started impacting the government finances in sibling state of Telangana, which is on a relatively stronger footing owing to Hyderabad city, Andhra Pradesh government is expected to face much more difficulty in finding resources to support economic development.