Share |

State Business Relations and Performance of Manufacturing Sector in Andhra Pradesh – A Case Study

This piece was co-authored by Prof. K. Srinivasulu with Dr. G. Alivelu and Dr. G. Gopinath Reddy as a part of the following:

Discussion Paper Series

Thirty One

November 2009

IPPG Discussion Papers

available at

IPPG Programme Office, IDPM, School of Environment & Development

University of Manchester, Arthur Lewis Building, 2.023, Oxford Road

Manchester M13 9PL; Telephone 0161 306 6438;


In this paper, we make an attempt to enquire into the politics of state-business

relations, how it has affected industrial development in general, and expansion of the

manufacturing sector in the State of Andhra Pradesh (AP) in particular. In AP, SBRs

have evolved gradually under different political regimes - from 'indifferent' SBRs

during the initial decades passing through critical junctures in the form of 'active' and

'proactive' phases and finally reaching their zenith during Chandrababu Naidu’s

regime and continuing in the Congress regime. The SBRs in AP are seen evolving

through different political regimes, and we have sought to capture their impact on

the performance of manufacturing sector, based on both qualitative and quantitative

sources. Examination of the secondary data reveals the dominance of registered

manufacturing in AP’s total manufacturing output. Firm level perceptions reveal that

business associations play a major role in the dissemination of information, rather

than in lobbying the government as might be the case in other states. Small firms are at a disadvantage compared to large and medium firms.



State Business Relations and Performance of

Manufacturing Sector in Andhra Pradesh – A Case


G Alivelu¹, K Srinivasulu² & M Gopinath Reddy³

Discussion Paper Series

Thirty One

November 2009

IPPG Discussion Papers

available at

IPPG Programme Office, IDPM, School of Environment & Development

University of Manchester, Arthur Lewis Building, 2.023, Oxford Road

Manchester M13 9PL; Telephone 0161 306 6438;


¹Centre for Economic and Social Studies, Hyderabad, India

²Osmania University, Hyderabad, India

³Centre for Economic and Social Studies, Hyderabad, India

Paper prepared for the DFID-funded Research Programme, Institutions and Pro-Poor

Growth (IPPG). The authors are grateful to DFID for the funding that made this

research possible. The views expressed in this paper are entirely those of the author

and in no way represent either the official policy of DFID or the policy of any other

part of the UK Government.

Material published by the IPPG may be reproduced free of charge in any format or

medium provided it is reproduced faithfully, not used in a misleading context and

properly attributed to the author(s). Copyright exists in all other original material

published by members of the Programme and may belong to the author or to the

University of Manchester depending on the circumstances of publication. Enquiries

should be sent to the editor at the above address.




Abstract 4

1 Introduction 5

2 Data and methodology 6

3 Mapping the politics of SBRs in AP and its impact on industrialisation 7

3.1 Neelam Sanjeeva Reddy (1956-60 and 1962-64) 8

3.2 First Critical Juncture: Shaping SBRs under Kasu Brahmananda 10

Reddy government (1964-71)

3.3 Pro-Active SBRs: Jalagam Vegal Rao (1973-78) 11

3.4 NTR Regime (1983-1989): Neglect of SBRs 13

3.5 Second Critical Juncture: Chandrababu Naidu Regime (1995-2004) 16

3.6 Congress Regime (2004 - ): continuation of pro-SBRs? 28

4 Interaction of institutions and organisations in determining manufacturing 29


4.1 Employment in the Manufacturing Sector 29

4.2 Labour Productivity in organised and unorganised sectors 32

4.3 Registered Manufacturing Sector 32

5 SBR and firm level perceptions 33

5.1 SBR and Infrastructure 34

5.2 Industrial Unrest 35

6 Conclusions and policy implications 35

References 38

Appendices 42



In this paper, we make an attempt to enquire into the politics of state-business

relations, how it has affected industrial development in general, and expansion of the

manufacturing sector in the State of Andhra Pradesh (AP) in particular. In AP, SBRs

have evolved gradually under different political regimes - from 'indifferent' SBRs

during the initial decades passing through critical junctures in the form of 'active' and

'proactive' phases and finally reaching their zenith during Chandrababu Naidu’s

regime and continuing in the Congress regime. The SBRs in AP are seen evolving

through different political regimes, and we have sought to capture their impact on

the performance of manufacturing sector, based on both qualitative and quantitative

sources. Examination of the secondary data reveals the dominance of registered

manufacturing in AP’s total manufacturing output. Firm level perceptions reveal that

business associations play a major role in the dissemination of information, rather

than in lobbying the government as might be the case in other states. Small firms

are at a disadvantage compared to large and medium firms.

Key-Words: State-business relations, political regimes, institutions, manufacturing




The developmentalist role of the post-independent state has been a major factor in

the industrialisation of India. The conscious government policy effort with public

investment and the establishment of the public sector enterprises and of economic

infrastructure projects have an obvious influence upon the industrial scenario in the

States. Industrial development thus has been the result of conscious government

policy effort with public investment playing a crucial role. However, with the recent

major change in the industrial policy regime, the importance of private investment

has increased enormously.

This raises the question why despite ‘uniform’ central policy framework some States

perform better than other States in terms of industrialisation? Is it due to the

differential policy interventions undertaken by the State governments or is it because

of the relationship that exists between the State government and the business


Given its expansion, the State’s role in ensuring developmental success or failure

deserves serious analytical attention (Sinha, 2005). In this context, effective statebusiness

relations (SBRs) or public-private sector cooperation can play the role of an

important determinant of economic growth at the macro level (Sen et al., 2007).

According to Hariss, good SBRs are based on benign collaboration between business

and the state with positive mechanisms that enable transparency, accurate and

reliable information flow between business and government; ensure the likelihood of

reciprocity; increase credibility of the state among the capitalists, and establish high

levels of trust between public and private agents. They provide a transparent way of

sharing information, lead to a more appropriate allocation of resources, remove

unnecessary obstacles to doing business and provide checks and balances on

government intervention. Further, effective SBRs lead to a more optimal allocation of

resources in the economy, including an increased effectiveness of government

involvement in supporting private sector activities and removing obstacles to

investment (te Velde, 2006). Governments that engage in good SBRs are thought to

a have a higher likelihood of adopting appropriate policies and reforms, while

enterprises participating in state-business discussions are more likely to support

these initiatives (Bannock, 2005; Herzberg, etal., 2005).


It is against this background that it becomes important to understand the nature and

status of industrial development in the State of Andhra Pradesh (AP) with respect to

the State’s policy incentives or disincentives. Furthermore, we intend to concentrate

on the role of the government in Andhra Pradesh, in initiating the processes of

reinventing the industrial sector in general and the manufacturing sector in

particular. The policy of re-industrialisation and re-emphasis on manufacturing

assumed importance as the probable response to certain critical conditions – such as

increasing inequality, massive poverty, rising unemployment and declining quality of

life for a large number of people and so the crucial question is: can the state in

post-colonial societies play a significant role in the processes of economic

development as it did historically in the development of the now-advanced countries

(Polanyi, 1957; Gerschenkron, 1962), while simultaneously projecting its image as

pro-people and pro-poor (Basu, 1991)?

Given these issues, the central objective of this paper is to examine the politics of

the government and business relation and how it affected the industrial development

in general and expansion of manufacturing sector in particular in AP.


The SBRs in AP seen evolving through different political regimes and their impact on

the performance of manufacturing sector is sought to be captured based on both

qualitative and quantitative sources. The key informant interviews involving a large

number of stake holders associated with policy making such as ministers,

bureaucrats, former and serving, who held important positions like that of secretary,

commissioner and managing director of industrial corporations (like AP Industrial

Development Corporation Ltd. (APIDC), AP Industrial Infrastructural Corporation Ltd.

(APIIC) ), members of the apex business associations (like Federation of Andhra

Pradesh Chamber of Commerce and Industry (FAPCCI), Federation of Andhra

Pradesh Small Industries Association (FAPSIA), Association of Lady Entrepreneurs of

Andhra Pradesh (ALEAP) form important source of qualitative information. The

quantitative information dealing with the performance of manufacturing sector is

drawn from data sources of National Accounts Statistics published by Central

Statistical Organisation (CSO). Apart from the secondary data, this paper also draws

its evidence from exhaustive field work completed in four research sites in Andhra


Pradesh (Sanathnagar, Jeedimetla, Gajularamaram and Nacharam). The data was

collected during December 2008 and February 2009. (For methodology on secondary

data and sampling for primary survey see appendix 1). The information collected

through interviews is complemented by macro-economic data at the State level.



Andhra Pradesh, formed in November 1956 by the merging Telangana region,

consisting of nine Telugu-speaking districts of the erstwhile Hyderabad State with

eleven districts of the Andhra State, has been a strong bastion of the Congress party

since its formation in 1956. It is only with the emergence and coming to power of the

Telugu Desam Party (TDP) in 1983 that the dominance of the Congress in the State

was challenged. The Congress dominance in State politics coincided with the

Congress dominance at the centre as well, except for the brief span of Janata rule

(1977-80) in the post-Emergency period. This means that there was a long period of

harmony between the centre and the State at political party and governmental

levels. It is therefore interesting to examine the impact of this on the process of

industrialisation in the State and assess how far the AP State could make use of this

for the above purpose.

Three critical factors in shaping SBRs are: ruling political elite, bureaucracy and

business classes. While the political class can play a crucial role in creating a positive

environment for industrialisation by making appropriate policies, creating and

enhancing the capacities of the institutions and by making crucial appointments, the

bureaucracy through its pro-active role can identify the potential actors and

smoothen the process by evolving policies, formulating strategies and activating

institutions and functionaries so that time and cost involved can be taken care of.

The critical factor in forging crucial impulse for better SBRs is the domestic business

class. The presence of this can act as a pressure on the former and make them act


In the history of SBRs in AP it could be noticed that there is a certain degree of

asymmetry between these factors. For the first decade after the State formation, the

political leadership was not very enthusiastic towards industrialisation partly because


of its social roots and also because of the absence of a catalytic factor, that is, an

active capitalist class, to exercise pressure on the regime. It is only since the mid-

1960s that pro-business initiatives could be seen taking shape, though agriculture

still constituted the focus of the economic policy making. It is only in the post-Green

revolution period that we witness the emergence of an aggressive rural rich, along

with an educated elite emerging from the rural landed classes with wider exposure to

technology, management and industry within India and abroad, which could look

beyond agriculture for opportunities of investment and enrichment and attempt to

influence the policy regime in the State.

3.1 Neelam Sanjeeva Reddy (1956-60 and 1962-64)

The Congress regime in the early decades of the State formation focused on agrarian

sector and rural development. The series of land and tenancy reforms and the

launching of the panchayat raj system and rural development programmes during

the 1950s and 1960s point to the priorities of the regime. What in fact got a boost as

a result of this were the agriculture and allied sectors, like the handloom industry.

The Chief Ministers (CM) like Neelam Sanjeeva Reddy (1956-60 and 1962-64) were

known not to be very pro-active towards the growth of the industry, especially with

respect to the involvement of private industrialists. In fact, it emerges from the

interviews with the administrators who happened to work with him that he

considered industrialists to be greedy and corrupt, a reflection of the peasant outlook

of the early generation of agrarian based political elite. As a result, it is not an

exaggeration to suggest that the only industrialisation that we see in AP was largely

due to the initiative of the Central government and to some extent the continuation

of the State government’s support to the existing public sector industries. During this

period, the central government made considerable investment in industry in the

State resulting in the establishment of large public enterprises.

Thus, a major part of the history of State was characterised by a system of

patronage that essentially banked on contracts in irrigation, rural development

sectors and Public Works Department (PWD) work1. The phenomenon of contractor

class which enriched itself on the state’s expanding developmental activities is an

important aspect in the phase of transition of the agrarian landed classes to the

1 Interview with BPR Vittal, IAS (Retd), August 2009, Hyderabad.


urban economy. It is the nexus of the politician-contractor class that has been one of

the key elements in the constitution of the ruling party support base.

The absence of enthusiasm for industrial development in the State can easily be

assessed. The most visible factor in this of course was the absence a strong business

class which could act as a driving force and put pressure on the government for a

positive policy dispensation. On the contrary, as suggested earlier, in AP we witness

the rise and expansion of a parasitical class that banked on political patronage and

enriched itself on the government civil contracts. This was in contrast to the

experience of Gujarat and Tamil Nadu which had historically seen strong industrial

class impulses. In addition, the mutual political and economic security implicit in

such a cozy relationship between the political elite and the contractor class seems to

have inhibited the latter from making any moves into business that could involve

risks.2 Furthermore, the absence of initiatives on the part of the political elite for the

first two decades despite the political access to centre and visibility of opportunities

to industrialise the State contributed to the missing of the opportunity. In spite of

the similarities between AP and Gujarat in terms of centre-State relations, the

contrast in terms of industrialisation remains striking because of the agrarian outlook

of the political elite in AP.

2 Interviews with most of the civil servants who served these regimes thus opined. Interviews with BPR

Vittal, TL Shankar, IAS (Retd) and BV Rama Rao, IAS (Retd) and former Chief Secretary , Government of



3.2 First Critical Juncture: Shaping SBRs under Kasu Brahmananda Reddy

government (1964-71)

The credit for giving a positive turn to the state-business relations in the AP State

goes to the Brahmananda Reddy’s government (1964-71). It was during the 1960s,

partly as a part of the all-India process, that institutions, meant to support and build

up industrial base in the State, were set up and activated. An attempt to compare

and contrast AP’s industrial performance with States like Tamil Nadu and Gujarat

were made and the reasons for trailing behind them were understood to be due to

the absence of initiatives to attract private capital to the State.3

The AP Industrial Development Corporation Ltd. (APIDC) was set up in 1960 with

the objective of promoting rapid industrialisation in the State. The role of APIDC in

the industrialisation in AP in 1960s and 70s was significant. It had three roles: i) to

provide industrial license to entrepreneurs through some sort of single window

clearances; ii) to provide financing; and iii) promotions through road shows. The AP

State Financial Corporation (APSFC), started in 1951, is an important body (Krishna,

1989). The AP Small Scale Industrial Development Corporation Ltd. (APSSIDC) was

established in 1961 to promote the interests of small scale industry. The AP Agro

industries Development Corporation Ltd. (APIDC) and the AP Industrial Infrastructure

Corporation Ltd. (APIIC) were set up in 1968 and 1973 respectively.

For positive SBRs, Brahmananda Reddy emphasised that the role of bureaucracy in

terms of formulation of policies and creation of interactive administrative culture is

crucial. To create such environment, he entrusted the task of interacting with the

business elite to positively inclined officials and he also made a special financial

provision to take of the cost of such interaction. It was during this period that

provisions for financial assistance, concessions and subsidies, providing valuable land

at cheap price were made. As a result, we see many industrialists coming forward to

set up industries in the State.

3 Interview with TL Shankar, IAS (Retd), October 2008, Hyderabad.


3.3 Pro-Active SBRs: Jalagam Vegal Rao (1973-78)

Jalagam Vengal Rao’s tenure as CM (1973-78) is considered to be an important

phase in the history of SBRs in AP. While taking forward the initiatives of

Brahmananda Reddy government, he emphasised the importance of leadership and

decision making styles in forging good SBRs. The major obstacle for it is the

notorious red-tapism in the functioning of governmental organisations. To overcome

this, he identified and entrusted the task to trusted and dynamic bureaucrats4 who

are seen as committed to this objective. One step forward in this direction is to give

freedom to them from any kind of interference.

Initiatives like the Backward Area Development Programme aimed at the

development of backward areas by identifying their industrial potential and providing

them with appropriate incentives and linkages. Vengal Rao was also instrumental in

strengthening APSFC, APIIC and APSSIC. These initiatives resulted in significant

changes in the industrial scenario in the State.5 As a result, for instance, a number of

forest-based industries like paper mills came up in the private sector in the place of a

small 10 ton capacity paper mill in the public sector in Rajahmundry.

At this juncture, we will focus on the most debatable subject in the phase of

industrialisation in an economy: the existence of a very strong industrial licensing.

AP occupied the last but one position in terms of industrial licenses issued to

different states during late sixties, but after 1970, AP occupied the fifth and sixth

positions with regard to the issue of ILs (see appendix 2). Thus, AP could attract

sufficient new investments into the industries during 1970s due to the proactive

decisions taken by the State government and leaders like Jalagam Vengal Rao. But,

did this trend continue in the later years also during the tenure of other chief

ministers? Our data on letters of intent (LOI)6, Industrial Entrepreneur Memorandum

4 Interview with Prof R K Mishra, Director, Institute of Public Enterprises, Hyderabad, October 2008.

5 As part of this exercise and also to ensure transparency a committee, comprising of both ruling and

opposition leaders was constituted to make recommendations. Interview with TL Shankar, IAS (Retd),

October 2008, Hyderabad.

6 LOI is the response to the application that the prospective entrepreneur has to make to the Secretariat

of Industrial Approvals (SIA) to enable the entrepreneur to apply for other clearances such as land, power

and capital goods or an import license (if applicable). After receiving various clearances, the entrepreneur

applies for what is known as the Conversion of an LOI to an industrial license (CIL or IL), (Sinha, 2006).


(IEM) 7and investment proposals (refer section 3.4 and appendix 4) reveals this


The subsequent CMs, especially during 1978-1983, were not known for any

significant contribution to the SBRs in the State. It was a period in the history of the

State, that despite a clear electoral mandate, the Congress party could not ensure a

stable government. Frequent change of CMs (four CMs in a period of five years),

continuous intervention of the Congress High Command, and encouragement to the

factional fights rendered this period the most unstable period of the Congress rule in

the State. As a result of the political uncertainty, which was the making of the

Congress leadership, the SBRs suffered a serious setback. The conspicuous absence

of political direction pushed the SBRs into ‘a state of coma’8. The following analysis

captures the situation vividly.

The analysis of comparative manufacturing sector backwardness of AP in 1964 in

relation to some of the more important States in India reveals that Andhra Pradesh

stands last amongst the seven States in terms of percentage share of productive

capital, employment, gross output and value added (see Appendix 3). This slow

growth in industries till the mid-sixties can be attributed to the fact that

industrialisation in AP primarily confined itself to agro-processing industries during

Neelam Sanjeeva Reddy’s tenure. But, thereafter, shifts have been taking place

towards foot-loose type products based on imported inputs from other regions

producing for national markets (Rosen, 1988; Reddy, 1989). A scheme of incentives

for setting up of industrial units was first introduced in the State in 1966 and was

made more attractive in 1969. The Central Investment Subsidy Scheme introduced

(CISS) in 1970 covered 14 districts. Further, the revision of CISS in 1976 resulted in

structural diversification within the manufacturing sector. The changes in the sectoral

income shares over a period of time are indicative of above structural changes taking

place in AP (Table 1).

7 Industrial investment is registered separately for the de-licensed and licensed sectors. Investment

intentions in the former sector are registered in the form of Industrial Entrepreneurs’ Memorandum.

8 Interview with Prof R K Mishra, Hyderabad, October 2008.


Table 1: Sectoral income shares in AP economy: 1970-71 and 1982-83 at 1970-71


Sector 1970-71 1982-83

Primary 56.38 49.26

Manufacturing 8.77 10.56

Registered 4.12 5.46

Unregistered 4.66 5.10

Secondary 13.43 16.23

Tertiary 29.40 34.51

Source: AP Statistical Abstract, GoAP, Hyderabad

3.4 NTR Regime (1983-1989): Neglect of SBRs

We have seen earlier that Jalagam Vengal Rao’s tenure as CM (1973-78) is

considered to be an important landmark in the history of SBRs in AP. But, the

emergence of Telugu Desam party (TDP) under the leadership of NT Rama Rao

ushered in a phase of negative SBRs in AP. NT Rama Rao (NTR) came to power in

1983. He signaled two important shifts in AP politics: one, the rise of anti-Congress

and anti-Centre rhetoric; two, the regionalist populism. The TDP, as its rise is

opposed to the politics of the Congress party, took a vehemently anti-Congress

stance and which as a consequence translated into anti-Centre rhetoric as the

Congress was in power at the centre. By widening the scope of anti-Congressism, the

TDP along with other non-Congress parties and governments in the country sought

to play a key role in the national politics by demanding a democratic rearticulating

the centre- State relations.

The second important aspect signaled by NTR’s political ascendancy was anchored to

the Telugu cultural and identity politics. Thus, his first tenure in power (1983-89)

was dominated by the rhetoric of cultural populist politics. In tune with this populist

thrust, policies/ schemes comprising of Rs 2 per kilo of rice, subsidies to farmers,

housing for the poor were emphasised. To sustain these schemes, when in the later

years the expenditure on these schemes increased many fold, the regime sought to

find a solution by boosting up the liquor sales.9

9 For an assessment of the impact of rice subsidy scheme on State government's indebtedness, Olsen



During NTR’s tenure, the anti-centre politics and populist policies and uneven thrust

on agriculture in their combined effect led to the neglect of the industry. Despite

this, it may be observed that the manufacturing sectors like handloom industry

which is a major employer in the State after agriculture was paid adequate attention

essentially as a source of rural employment through Janata cloth scheme

(Srinivasulu: 1994, 1996). It is sad to note that not only industrial development saw

a setback but even cinema industry, to which he owed his popularity, was pushed

into a crisis with the introduction of the ‘slab’ system.

This is clearly evident from the data on LOI and IL in the A P State (appendix 4). It is

argued that the pro-business shift in the central government in India in the 1980s

was reflected in those States where the political party in power was aligned with the

central government (Rodrick and Subramanian 2004). As a consequence of this,

States aligned with the central government benefited the most and AP unfortunately

is not one such State.

The neo-rich agrarian class of the coastal Andhra region that emerged as a result of

the political economy of Green revolution and constituted the principal social

constituency of the TDP found the lack of enthusiasm on the part of NTR to be

slowing down its transition to the non-farm sectors. For it was during the 1970s and

1980s that we observe a major shift of the agrarian families of the coastal Andhra to

agro-processing, hotel, and film industry along with service sector. This potential

with a proper political and policy direction could have been the basis of an energetic

expansion of the industrial base of the State, unfortunately it were not to be (see

table 2). What could instead be noticed was the response of the regime to a limited

group of local industrialists and professional NRIs who could benefit from its

patronage to expand into the education, hospital, pharmaceutical, media and service



Table 2: Average Annual Growth Rates of State Domestic Product from the

Manufacturing Sector in AP during 1980-81 to 1992-93

Year Manufacturing Registered




1980-81 to 1983-


5.97 8.52 2.71

1984-85 to 1987-


4.70 6.02 2.70

1988-89 to 1992-


1.88 1.58 2.50

Source: NAS

Three principal social forces that exhibited a strong potential to expand the industrial

base of the State were: i) the market oriented rich peasant class in the Green

revolution areas of coastal Andhra region that has grown into a matured class eager

to expand into trade and business; ii) the artisanal skill base, especially in handloom

and power loom sectors, could have been used to make the sectors competitive and

export-oriented; iii) the enthusiastic entrepreneurial Non-Resident Telugus, the bulk

of whom consist of Kammas (the core social constituency of NTR’s political base), if

properly encouraged could have played a significant role in the industrial growth of

the State.

In addition, the very political and policy discourse of the TDP proved to be

detrimental to a proper growth enhancing SBRs. Firstly, the TDP’s emergence is

premised on anti-Congressism and once in power, the TDP regime not only continued

its anti-Congress stance but further expanded it by pursuing anti- centre (as NTR

famously said “centre is a myth”) politics in a vigorous manner thus displaying his

national political ambition. Secondly, the social coalition the regime forged was

defined essentially in caste-cultural terms (Other Backward Castes (OBCs), women

and minorities) that beyond the populist cultural, it failed to take cognizance of the

long term economic interests of coalition partners and implications of such a populist

policy dispensation. Thirdly, the populist welfarist policy dispensation became such

an obsession that the regime literally became blind to the (anti-) developmental

implications of populist policies.


Thus the absence of a proper perspective on the SBRs has not only led to the loss of

an opportunity to expand the industrial base of the State but also paved the way to

its counter-point that is fast-track reforms by the subsequent regimes that pushed

large sections of agrarian and artisanal sections and working people into a serious

economic and social distress as evident in the large scale occurrence of starvation

deaths and suicides in the State.

3.5 Second Critical Juncture: Chandrababu Naidu Regime (1995-2004)

NTR came to power in the 1994 assembly elections with a huge popular mandate

which was attributed to his populist agenda of subsidised rice scheme, power subsidy

to the agrarian sector and total prohibition in the State among other promises. He

was soon displaced by his son-in-law Chandrababu Naidu in the 1995 August coup

which is often interpreted as an internal affair of the NTR’s family and party. An

analysis of the drama seen in the proper context and in relation to the subsequent

developments clearly shows that it was not a simple event of change of guard of the

TDP but a contestation that involved different social classes, especially the

entrepreneurial class which successfully directed the crisis to a finale; one of the

dramatis persona being the owner of the leading Telugu dailt Eenadu. (The role of

Eenadu is worth noting). In other words, the leadership crisis in the TDP was

effectively used by the disgruntled capitalist class which was restless with the

populist policies and obsessive self-image driven governance of NTR.

Chandrababu Naidu’s regime, in tune with the desire of this social class which was

instrumental in bringing him to power, played a pro-active role in building an image

of AP being an industry-friendly and pro-business State. Naidu brought about a

remarkable shift in the style of functioning of the office of CM. Unlike the earlier CMs,

Naidu was forthcoming with a direct and almost one-to-one dialogue with the

industrialists, thereby conveying the message that his government was businessfriendly

(table 3).


Table 3: Average Annual Growth Rates of State Domestic Product from the

Manufacturing Sector in AP during 1993-94 to 2005-06

Year Manufacturing Registered




1993-94 to 1996-


8.39 7.82 9.71

1997-98 to 2000-


1.72 1.32 2.52

2001-02 to 2005-


6.37 7.15 4.79

The decline in the growth rate of registered manufacturing sector during the late

nineties and early 2000 can be attributed to the growing sickness of certain

categories of small scale industries. The apparent reasons for the high occurrence of

sickness among the small scale units may be due to defective financial planning,

obsolete technology, power and energy shortage and also the problems related to

the supply of raw materials. Also, during this period Chandrababu Naidu

concentrated on the growth of IT sector in the State. Thus, In AP, the tertiary rather

than the secondary sector has become the engine of growth. One of the major

sources of the high growth of services in SDP has been the recent emergence of the

IT sector in Telangana10 region (Chakravarty and Alivelu 2009). Though the policy

regime changed under reforms, which deregulated and got rid of bureaucratic

controls, the responsibility for the necessary reforms was left to the States. The

requirements for the licenses, permits and inspections at the State and local level

continued to be onerous as the enterprises faced difficulty in procuring land,

electricity and water connection. Secondly, there was a credit squeeze in 1996,

based on the quality of the credit, which also seemed to have dissuaded industrial

producers from plans to expand their production and import technology

(Vaidyanathan, 1995).

Theoretically speaking, effective SBRs result in a decline in ambiguity surrounding

the firms, positively influencing their performance. In this regard, a measure that we

can include is a firm’s opinion about getting a clearance for a proposed initiative. The

10 Andhra Pradesh consists of three regions – Telangana, Coastal Andhra and Rayalaseema


higher the problem of uncertainty, the lower would be the effectiveness of SBR.

Furthermore, we also make an attempt to include the percentage of senior

management’s time spent on addressing government regulations/officials/and paper

work. Good SBRs are expected to lower the administrative constraints faced by the

firms (Qureshi et al, 2007).

Settings of Industrial and Related Procedures:

Large vs. Small Firms Experience

Our firm level analysis shows that for already established firms, be it large or

medium, getting permission for setting up a new production unit, or expanding the

existing one or acquiring land, is not a problem. It involves the normal official

procedure and there are no hassles in getting clearance for the proposed initiative.

However, the small and the medium firms which are into business for a short period

of time face lot of procedural hassles with respect to the above issues (for some it

takes more than a year).

To quote an instance, when a small entrepreneur who is in manufacture of fast food

items, started a food retail outlet in a building by investing huge amount of money,

which they were told is a commercial complex. After few months, they were told

that it is a residential area, and their trade license was cancelled. When the

entrepreneur put lot of efforts, trade license was given for a period of one year, but

again was withdrawn after the completion of one year. So they had to shut down the

outlet despite investing huge amount of money.

With regard to the senior management’s time spent on addressing government

regulations/officials/ and paper work, large and medium, on an average, spend 30 to

40 percent of their time on the above issues. Most of them have their own

consultants from within the office cadre. For the small firms, there emerges a

different picture. On an average, they spend nearly 60 to 80 percent of their time on

governmental procedures. To sum up, good SBRs are expected to lower the

administrative constraints faced by the firms. But, this appears to be true only in the

case of large and medium firms and not in the case of small firms.

In this context, we can observe that capital formation assumes overriding

significance in the milieu of the policy making by the State and central governments.


During the nineties and early 2000, as is evident from appendix 5, the creation of

assets occurs more in the private sector compared to the public sector, both at the

State level and All India level. This signals the pro-business attitude of the State

government encouraging the private entrepreneurs to invest in the industrial sector.

It can also be seen that though the capital formation in the private sector hovers

around 65-70 percent, role of private sector is lower than the country average

indicating the need for further push (see appendix 6).

Here it becomes important to note that the shift brought about by the launching of

the second generation of economic reforms, involving the reduction of subsidies,

downsizing of public employment and privatisation of PSEs in which the States are

crucial actors. The committee under the chairmanship of Subramaniam constituted

by the NTR government to go into the question of crisis of PSEs in AP came in handy

to Naidu. The committee in its report submitted in June 1995 recommended far

reaching changes: closure of 9 PSEs; partial disinvestment in 10 PSEs; privatisation

of 2 PSEs; restructuring 7 PSEs.

The international institutions like the World Bank and DFID needed a State and

persona to be projected as the role model. Naidu with his enthusiasm was found to

be a much needed poster boy. The national and international attention from the

donors, western media and pro-reform political and policy elite catapulted Naidu into

the global circuit.

The strong presence of Telugus among the NRIs added strength to this image. It

may be recollected that NTR in the 1980s build up linkages with the Non-Resident

Telugu associations, especially in the USA. But he used them basically as a spring

board for his cultural politics of Telugu pride. These networks were not drawn upon,

at least in a concerted manner, for furthering business investment during NTR’s

tenure. Naidu with a focused direction appealed to the Non-Resident Telugus to

invest in AP (see table 4).


Table 4: FDI Proposals State-wise (August 1991- May 2002)

State Number of


Amount of

FDI approved

(Rs. in



(share in all


Andhra Pradesh 1010 130687 4.66

Tamil Nadu 2152 232360 8.29

Gujarat 1049 184533 6.58

Maharashtra 3959 486602 17.35

Orissa 136 82290 2.93

West Bengal 591 88024 3.14

All India 21926 2804421 100

Source: Indian Investment Centre, (percentages calculated

based on the data)

It may be noted that the Telugus who went to the US in the 1960s and 70s were

mostly educated professionals. Some of them, especially in the medical and software

sectors, graduated to be entrepreneurs and venture capitalists. Naidu aimed at

tapping this potential by emphasising on the importance of knowledge economy and

the ability of AP to tap the opportunities in this sector. Thus the regime found strong

sources of ideological legitimacy to its attempt at policy reorientation in the

international institutions and media, NRIs and internally in the domestic

entrepreneurs, local media and the educated middle classes.

With the 1999 assembly and the national elections establishing him as the

undisputed leader of the TDP, Naidu speeded up the reform process, launched

earlier. What is to be noted here is that the reforms here were not merely aimed at

improving SBRs through institutional and organisational changes but in fact

advertised a major revamping of the governance structure through IT ES to ensure

SMART (Simple, Moral, Accountable, Responsive and Transparent) governance.

Naidu’s pro-SBR strategy consisted of two aspects: one, creating a pro-business

discourse and two initiating strategic and institutional changes. This is reflected in

the investment proposals granted to the State of AP during his regime continuing

well beyond into the congress regime (appendix 7).


The formal institutional changes attempted included creation of single-window

clearance11 that sought to avoid the bureaucratic delay; simplification of approval of

projects; institutionalising wide range of incentives like tax holidays and exemptions,

creation of infrastructural facilities, provision of subsidies for land, water, power,

transport, etc; relaxation of labour and contract laws (exemptions from labour

inspections, permission for three shifts, etc). The determination to pursue reforms

are made amply evident through the reversal of the populist thrust of the earlier

regime and the initiation of unpopular measures like the unbundling of the Andhra

Pradesh State Electricity Board (APSEB) recommended by the AP Electricity

Regulation Commission set up in 1999 to review the working of SEB.

How efficiently government is organised is as crucial as the organisation of the

private sector for SBRs. To measure the role of government in state-business

relations, we consider the firm’s perceptions about the efficiency of government in

delivering services (for example, availability of road and railways, availability of

warehouses, availability of industrial estates) on a scale of 1 (= very inefficient) to 5

(= very efficient). As well as this, the provision of telecommunication facilities,

supply of electricity, supply of water etc., also become crucial in the judgment of


Efficiency of Government and Service Delivery

The majority of the entrepreneurs rate the performance of the government in

delivering services like roadways as satisfactory (3 on a scale of 1-5). They also felt

that there is improvement in the service delivery of roadways over the last five

years. On a scale of 1-5, the performance of roadways was rated as 2 five years ago,

now, it is 3. However, a few small entrepreneurs do not agree to the above opinion

and rate the service delivery of roadways as inefficient (2 on a scale of 1-5) now and

also five years back. This is true especially for the small exporters. They judge the

performance of roadways based on the costs incurred in moving the products from

one place to the other. They find it extremely difficult to export their commodities as

11 Quite to the contrary, the single window system did not seem to have worked the way it was intended

on the ground. This comes out very clearly from the interviews not only with business association leaders

but also with some bureaucrats and academics.

Interviews with B. G. Sastri, Former President of FAPCCI, B V Rama Rao, IAS (Retd.) October 2008,

Hyderabad and Prof R K Mishra, Director, IPE, Hyderabad.


they have to incur huge expenditure in transporting their commodities. One small

entrepreneur expressed extreme difficulty in this aspect. She said that as she had to

bring edible oil from Vijayawada to Hyderabad and then export it, she had to face

huge transportation costs in moving her product from Vijayawada to Hyderabad.

With respect to the availability of industrial estates, members of Association of Lady

Entrepreneurs of AP (ALEAP) are happy in spite of not having proper

telecommunication facilities within the estate. However, one entrepreneur belonging

to the medium firm doing business (chemical sector) from industrial estate within the

city (Sanathnagar) states that he is forced to relocate his firm as the government

feels that the firm produces hazardous substances. Yet another problem faced by

the firms is the stringent rules of pollution. Most of the firms doing business from the

industrial estates within the city like Sanathnagar, Nacharam etc., are asked to

either shut their business or relocate as the firm releases effluents which cause

pollution hazards. One small entrepreneur cited the harsh rules associated with

pollution as an example of bad SBR. The other firms on an average gave 4 on the

scale of 1-5 for the availability of industrial estates.

Only one firm gave 3 on a scale of 1-5 for the availability of warehouses.

Firms and Infrastructure

Almost all the firms depend on the State electricity board for power supply and are of

the opinion that there is no problem with respect to electricity supply. During

summer, when there are power cuts, management operates shift system and runs

the production process accordingly. All those industrial firms in Gajularamaram

industrial estate set up by ALEAP can avail free power up to the capacity of 13 HP,

over and above that they have to pay for the power.

The firms are satisfied with the provision of water facilities by the government. In

the industrial estates of Jeedimetla and Sanathnagar, firms have formed into a

society and society provides water to various firms. In Gajularamaram, where ALEAP

has its industrial estate, there is no water connection and the entrepreneurs procure

water through water tankers.


With regard to telephone connections, large and medium sized firms do not face any

difficulty. They say that they now get the connection immediately after applying

while it would take two to three months, five years earlier. About 10 years back, to

get a telephone connection, the firms had to wait for more than a year. On the

contrary, small firms feel that getting a telephone connection is a Herculean task

even now. One small entrepreneur was not able to get the telephone connection for

her firm as the department asked for submission of too many papers. Not able to

tackle the cumbersome procedure involved, she got the telephone connection in the

name of the larger business group of which she is a part. Despite the mobile

revolution, getting a telephone connection from the state telephone department is a

difficult task for the small entrepreneurs.

Andhra Pradesh: Vision 2020 (Government of A P: 1999), a document prepared by

international management consultancy firm McKinsey in 1998, was presented as the

official statement of the long-term policy direction of the regime.12 Identifying

nineteen growth engines across different sectors of the economy, it promised to

move the State economy from agriculture to a diversified economic growth path. It

also saw governance reforms that ensure efficiency, transparency, accountability and

speed as essential ingredients of the vision. It is necessary to note that the

document found favour with the educated middle classes as much with the corporate

world thereby generated a positive public response and provided ideological

legitimacy to its reforms.

Naidu regime brought about a perceptive informality, hitherto unknown, in its

relation with the business houses, associations and leaders. Frequent interactions of

the CM and his officials with the businessmen in the Secretariat, in the social

gatherings and business association meetings and the CII and FICCI conferences

were to find regular reporting in the media. Media was used to send the message of

new dispensation of the regime. Media, given its corporate connections, willingly

participated in this discourse by giving prominence to this dimension of the regime.

What role do these organisations play in the State of Andhra?

12 For critical analyses, see D N Reddy (ed), 1999.


Business Associations and their Interaction with the Government

Firm analysis at the field level shows that all the firms (large, medium and small) are

members of business associations. The majority of them are members of Federation

of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI). This observation

contradicts the argument that there is no business case for large firms to join

business associations (BA) as they could lobby government directly. Though the

large firms have more access to the government and bureaucrats and can approach

the government directly, they take membership in the BAs. This membership keeps

them informed about the various initiatives and policies undertaken by the

government. The large firms, in fact, by being members of BAs cater to the needs of

the small firms by giving them guidance on policy matters, helping the BA in

organising the workshops and sharing their work experiences with the other firms in

the association. The women entrepreneurs have membership in Association of Lady

Entrepreneurs of Andhra Pradesh (ALEAP). There exists a cordial relationship

between the associations and the government. The associations are made part of the

budget discussions. The presidents of these BAs interact with the government

officials as and when the necessity arises.

In terms of the services, providing information on government regulations is the

most significant service provided by business associations to the firms covered in the

sample. This view was echoed by all the firms in the sample. Most of the firms

accorded 4 and 5 on a scale of 1-5 where 1 (very inefficient) and 5 (very efficient).

The members are also happy with regards to the performance of FAPCCI in terms of

conducting workshops, training programmes etc., to enhance the capabilities of the

members. FAPCCI publishes its newsletter regularly and the information is uploaded

on the website for the benefit of the members. The issues deliberated with the

government are informed to all its members on a continuous basis. The meetings are

conducted regularly and as and when a particular issue arises, a separate meeting is

again convened. Our findings also reveal that providing information on government

regulations appears to be the most effective service of the FAPCCI. But, when it


comes to the issue of lobbying the government, the members of FAPCCI strongly feel

that that the service provided by the association in this regard is not satisfactory.

Again, on a scale of 1-5, firms accord 2 in this regard. When we pondered over this

issue with the FAPCCI committee members, they said that they try their best to help

the members.

Women Entrepreneurs and ALEAP

However, members of ALEAP are at an advantageous position as the women

entrepreneurs feel that the association lobbies with the government wherever

necessary. This association was established in 1993 with an aim to bring together

women entrepreneurs trying to help each other and work in collaboration for welfare

maximisation. ALEAP developed the First Women Entrepreneurs Industrial Estate in

India at Gajularamaram, Ranga Reddy district of AP. The estate has all the required

infrastructural facilities to transform women into outstanding entrepreneurs. It is a

state level organisation with an objective of uplifting women and empowerment

through establishing small and medium enterprises. ALEAP’s members are mostly

first generation entrepreneurs and ALEAP through its strong support network with

government and non-government organisations, provides the expertise and other

required facilities for entrepreneurship development. The association is also

developing another industrial cluster for women entrepreneurs in Food Processing at

Vijayawada. They have their own counsellors who give them advice on various

business activities. Their Centre for Entrepreneurs Development (CED) provides

entrepreneurship abilities to the women and contributes to State’s economy. On the

one hand, the small firms which are part of FAPCCI feel neglected; on the other

hand, small firms in ALEAP are quite satisfied with the services provided.

ALEAP also conducts training programmes, workshops and entrepreneur

development programmes. The recent achievement of ALEAP is that some of the lady

entrepreneurs are sent to the Indian School of Business for a course on

entrepreneurial development. As an association, ALEAP has strong reach and tie-ups

with retail outlets and supply chain stores. ALEAP members have been recognised by

large scale industries as strategic vendors in manufacturing their products. To quote


the efforts put in by ALEAP in helping the women entrepreneurs, one small

entrepreneur informed us she bagged a contract from Bharat Heavy Electrical

Limited (BHEL) to supply tubes to the company because of the initiation of ALEAP.

In fact, she displayed her product (she is a manufacturer of light weight grills which

she supplies to the apartments around the estate) at an exhibition organised by

ALEAP wherein the large scale industries visited the exhibition. When BHEL showed

interest in her product she pursued with them and bagged the contract from it. The

company, in turn, gave specifications for the manufacture of tubes. As she is

technically not equipped with knowledge, she is planning to take help from her

husband who is an engineer and also employ skilled workers. While FAPCCI does not

provide any financial assistance to its members, ALEAP, on the other hand,

endeavors to provide financial assistance to its members in the form of ALEAP Credit

Guarantee Association (ACGA). Members of the association will be provided financial

assistance from Andhra Bank without collateral security.

Small Firms and FAPSIA

Yet another association that caters to the needs of the small firms is the Federation

of Andhra Pradesh Small Industries Association (FAPSIA). This was established in

1992 and disseminates information in the form of annual reports, monthly

newsletters, training courses and seminars. The association claims that it plays a

major role in influencing the budget and government spending plans. The incentives

for SSIs take the form of discounts, subsidies on power, tax refund, reimbursement

of local taxes, special incentives to women entrepreneurs etc. Despite these

initiatives, why is it that the small entrepreneurs feel neglected? This is one area

which needs to be probed further.

To conclude, the effect of SBR works primarily through provision of information on

government regulations and lobbying government. FAPCCI which has a large

membership in comparison to ALEAP is successful in provision of information on

various aspects to its members and does not play much role in lobbying the

government. ALEAP, though successful on both the parameters, owing to its limited


membership confined to lady entrepreneurs, indicates that the main activity of these

associations is dissemination of information. If the business associations play an

active role in lobbying the government, then the SBRs become more meaningful.

Organisational changes in the government-business relations include the rise in the

prominence of the APIIC as the nodal agency for facilitating the project preparation,

land acquisition, providing infrastructural facilities, etc. Officials with pro-corporate

aptitude and dispensation are identified and assigned the responsibilities and made

duly accountable. There job was to produce the results.

The developments pertaining to the promotion of the Information Technology (IT)

sector highlights the changes in the discursive, institutional and organisational style

during Naidu’s regime. The construction of the HITEX City, consisting of Cyber

Towers and Cyber Gateway, which began in 1995 under Public Private Partnership

(PPP) soon after Naidu’s coming to power, for the promotion of the IT sector,

became the symbol of the regime change in the State and Cyberabad (as distinct

from the twin cities of Hyderabad and Secunderabad) as its locale. Soon reputed IT

giants like Infosys etc., gravitated to it. The establishment of the Microsoft School for

Software Technology (MSST), the first R&D centre by the Microsoft outside the US

along with the Indian Institute of Information Technology (IIIT) in Hyderabad is

considered to be major achievement of the Naidu government. The Naidu

government specifically tried to showcase the HITEC city as a demonstration of its

pro-business dispensation.

What is worth noting here is that Information Technology is not just seen as a sector

capable of generating employment and incomes but also as a mechanism to put in

place a system of good and transparent governance. Governance reforms and IT as

an instrument of improving governance to “smoothen the interface citizens and

business has with the government, by making the latter more responsive” but also to

“improve internal efficiencies, integrate services…” [Naidu: 2000, p. 83]

Behind this showcasing of the IT and so-called Cyberabad as the face of AP ‘shining’,

there was a gross neglect of the rural economy and the manufacturing artisanal and

modern industrial sector. The projected development could not assuage the


grievances of the majority of the population dependent on agriculture and allied

occupations. Their anger caused him an electoral defeat in 2004 [Srinivasulu: 2004.]

3.6 Congress Regime (2004 - ): continuation of pro-SBRs?

The Congress came to power in 2004 by articulating the agrarian and rural crisis. In

tune with its electoral promises, agriculture was high on the Congress agenda. As a

consequence, agricultural development and irrigation attracted huge attention. But

this has not resulted in the neglect of the industry (table 5).

Table 5: State wise status of Industrial Entrepreneurs Memorandum Implemented in

India August 1991 – October 2006 (Rs. Crores)

States IEM Proposed IEM implemented

No. Investment


No. Investment




4734 199113 507 14525

Tamil Nadu 5798 139930 438 9638

Gujarat 8242 352601 1121 68810

Maharashtra 12451 290855 961 29106

Orissa 1026 166877 52 1843

West Bengal 3844 85968 475 28963


Though AP’s performance, in terms of investment proposals implemented, is

satisfactory, the government has to think seriously about how to attract more

investors into the economy. In the new industrial policy, 2000-05, for creating an

appropriate organisational structure to achieve speed in decision making in matters

concerning industrial projects, the State Investment Promotion Board (SIPB) was

formed. The SIPB will meet once in a month for the purpose of taking a final decision

regarding investments and promotion of industries in the State. However, the

majority of the investment projects in the State remain in the announcement State

in contrast to the claims of successive governments on promoting an industryfriendly

environment (The Hindu, 6-11-09).

In its Industrial Policy of 2005-2010, the State government provided 15%

investment subsidy on fixed capital investment subject to a maximum of Rs.15.00

lakhs to SSIs and an additional investment subsidy of 5% on fixed capital investment


limited to Rs.5.00 lakhs for Scheduled Castes and Scheduled Tribe (SC/ST)

entrepreneurs. The government also extended cent per cent exemption in stamp

duty for lands allotted to SC/ST entrepreneurs. To boost more industrialisation in the

State, women entrepreneurs were also given incentives in this industrial policy.

One significant initiative by the Congress regime that has a direct bearing on the

SBRs is its pro-Special Economic Zone (SEZ) initiatives. With 57 notified and 99

formally approved SEZs, AP has acquired a dubious distinction of being one of the

leading States in terms of the number of SEZs. The pro-active role of the

government could be gauged from the fact that of these 30 SEZs have been

developed by the APIIC and couple of them by other government agencies. While as

many as 95 SEZs are related to the IT and IT-enabled services sector, the number of

multi-purpose SEZs is just eight. Most of these IT/ITES SEZs instead of attracting

new companies have only resulted in the relocation of the old ones for availing tax

incentives. With serious doubts raised about their role in advancing industrialisation,

they assumed notoriety as land acquisition gave rise to allegations of land scams and

large scale displacement of rural population in these areas resulting in local protest




In this section, we focus on the performance of the manufacturing sector in the State

during the period 1980-81 to 2005-06.

4.1 Employment in the Manufacturing Sector

At the all India level, manufacturing sector employment has increased both in the

rural as well as in the urban areas in 2004-05 over 1993-94.and the State of AP

corresponds to the national picture (Table 5).

Table 5: Employment in the Manufacturing Sector in Some Selected States: Rural

and Urban

(per thousand work participation rates by the usual status)












AP 86 69 195 191

Orissa 111 64 140 166

WB 135 161 276 302

Maharashtra 56 50 242 249

Gujarat 78 92 372 310

Tamilnadu 140 129 309 299

Karnataka 62 67 217 231

India 81 70 246 236

Source: NSS Report No. 409, 515 (Vol. 2)

However, at the All India level, AP stands in the second to last position in terms of

employment in urban areas, while it stands at fourth position, in terms of rural

employment in 2004-05. The better position of rural employment in AP is due to the

growth of construction activities. We can always argue that there is an increase in

employment when it is coupled with the increase in the wage rates. Most of the

authors like Goldar, 2000, Venkatramaiah et al, 2003 contend that the organised

industrial sector experienced a rise in employment growth in early 2000, but that is

due, mainly to decline in real wage growth. So the above increase in employment in

the manufacturing has to be taken with a pinch of salt.

Table 6: Percentage Share of Unorganised Manufacturing Employment in total by

some States classified by Rural and Urban, 2001


Rural Urban

Andhra Pradesh 9.9 (3) 7.0 (6)

Bihar 5.2 (6) 0.7 (14)

Gujarat 2.3 7.1 (5)

Haryana 0.7 1.8 (11)

Karnataka 5.3 (5) 5.8 (7)

Kerala 3.5 1.7 (12)


Madhya Pradesh 4.1 3.6 (9)

Maharashtra 5.2 (6) 13.2 (2)

Orissa 8.6 (4) 1.0 (13)

Punjab 1.4 3.1 (10)

Rajasthan 2.7 3.8 (8)

Tamil Nadu 0.7 13.5 (1)

Uttar Pradesh 15.4 (2) 13.1 (3)

West Bengal 18.4 (1) 11.1 (4)

Source: NSS, Report No. 479; Unorganised Manufacturing Sector in India:

Employment, Assets and Borrowing, 2000-01 Note: Here, India as a whole

has been considered as 100, Figures in the parenthesis indicate ranks

In urban areas, Tamil Nadu takes first position, while AP stands at the sixth position

in its share of unorganised manufacturing employment in the country (Table 6). On

the other hand, in rural areas, while West Bengal stands at the first position, AP

stands at the third position. Economic reforms were expected to encourage

employment in the informal/unorganised sector; but activities within the unorganised

sector which are expected to be relatively better paid – as they draw their growth

momentum from the demand side factors – do not seem to have generated job

opportunities on a large scale in urban areas (Arup et al, 2006)

When we take into consideration total employment in the manufacturing sector,

manufacture of tobacco and tobacco products generate the highest share of

employment in 2001 when compared to the other sectors (appendix 8). The

dominance of beedi-making activity has resulted in more employment generation by

this sector. Table 7:

Compound growth rates of manufacturing employment: organised and unorganised

(in percent per annum)


1981-82 to


1991-92 to 2001-


Manufacturing 1.03 2.69

Organised 1.89 0.89


Unorganised 0.62 3.51

Source: Population Census and Annual Survey of Industries


Rate of growth of employment of the manufacturing sector as a whole increased in

the second period over the first in the State (Table 7). However, it is the

unorganised sector which has actually contributed to the increase in the rate of

growth of employment and the rate of growth of employment in the organised

manufacturing shows a decline in the second period over the first in AP. Have

economic reforms reduced employment growth in the organised sector? It is possible

that economic opportunities have not increased in the post-reform period in spite of

higher growth. Furthermore, the lower growth in organised employment can be

attributed to the slowing down in employment in the public sector enterprises. The

closure of many sick units could have resulted in the decline in the growth of

employment in the organised sector. The increase in the unorganised sector

employment is due to the expansion in construction activity and the beedi industry in

the State.

4.2 Labour Productivity in organised and unorganised sectors

Labour Productivity (O/L) in the registered manufacturing sector shows an increase

during 1987-88 to 1992-93 (Appendix 9). This trend continued till 1996-97 and

thereafter registered a steep decline in 1998-99. Then O/L started fluctuating and

then registered an increase in 2003-04 (Appendix 10).

What about the labour productivity in the unorganised sector in AP vis-à-vis the

other States? (Appendix 11). When we compare the State of AP vis-à-vis the other

States, we observe that the GVA per annum both by rural and urban workers is low

in AP. Thus, while labour productivity in the organised sector showed an increase,

the labour productivity in the unorganised sector is not encouraging.

4.3 Registered Manufacturing Sector

Considering the importance of manufacturing sector within the industrial sector in

general and registered manufacturing in particular, we decide to narrow down our



We now take stock of the situation concentrating only on the latest year13 (2003-04)

for which the ASI data are available at the State level. It is important to mention

here that we have considered net value added figures for output, total persons

engaged for labour and the value of fixed capital for capital.

Share of Net Value Added (NVA) and the productive capital of chemical, food

products and basic metals constitute around 47 percent of the total manufacturing in

2003-04 (Appendix 12). Though the share of NVA of tobacco is low when compared

to that of the food and beverages sector, it generates employment almost double its

share of NVA. Further, non-metallic mineral products generate the highest share of

employment as compared to the other sectors.


Transaction costs associated with regulations, bureaucracy and poor institutions,

reflect resources diverted from production and may have significant implications for a

firm’s performance (World Bank, 2004; Groot et al. 2004). In this context, through

conducting a primary survey, we make an attempt to capture these external factors

by considering the total number of inspections during the year and measures for


Transaction Costs and Rent Seeking : Firms’ Experience

Almost all the firms except one large and one medium (with a niche for themselves)

have said that they have to pay bribes for the inspections to take place. At the same

time, they do agree saying that there is no harassment from the government

inspectors. To quote, “It’s a part of the system and we have to accept it” are the

words uttered by majority of them. To answer the question of whether the number of

visits come down once the payments are made, the reply is that the mandatory visits

do take place even after payment. The only hassle they face is that some of the

inspectors may delay the process of giving a final decision after the visits if the

bribes are not paid on time. In fact, one small entrepreneur said that she makes it a

point to visit the officials on the occasion of festivals and give them bouquets, sweet

13 We have considered the industrial categories having shares of five percent and above.


boxes or even greeting cards to keep them in good humour.

Thus, though there exists the practice of unofficial payments to the officials who

carry on with the mandatory inspections visits, almost all the firms’ feel that there is

no harassment from the officials.

5.1 SBR and Infrastructure

Variations in risk and infrastructural conditions explain a good deal of difference

between the levels of domestic and foreign investment taking place in the economy.

We know that infrastructure plays an important role in attracting industrial

investment into the economy. Secondary data in this section makes an attempt

towards this direction.

Physical and social infrastructures are important for economic growth and higher

human development. Economic infrastructure like transport, communication and

power facilitates accelerates the growth of economic activities and contributes to the

national or State GDP (Dev and Ravi, 2009). In AP, the contribution of the transport

and communication sector to total GSDP at current prices was 6.31 percent in 1960-

61 and it increased to 7.94 percent in 2004-0514.

The total road length in AP in 1956-57 was 17086 kms; on average, this was 6.21

kms per 100 sq. kms and 0.55 kms per 1000 population (Dev and Ravi, 2009). The

total road length increased to about 71.32 per 100 sq.kms of geographical area as

on 31st March, 2003 (Appendix 13). This is again due to the policy initiatives adopted

in the State Industrial Policy 2000-0515.

With regard to post offices and telephone connections, in AP, there were around 21

post offices and 4121 telephone connections per lakh population as on March 2005.

Despite improvement in infrastructure in the State, the infrastructure index

presented in the report of the Tenth and Eleventh Finance Commission for major

14 Directorate of Economics and Statistics, Government of AP, 2005

15 Infrastructure facilities such as roads, electricity, water, drainage etc., to be provided at the door step of the proposed

industry in the areas identified by the State Government as industrial areas. Government also facilitates creation of allied

infrastructure such as telecommunication facilities including internet connectivity and information kiosks, transportation

links from industrial areas to towns (bus service), Housing complexes nearer to industries, container depots and exhibition

halls by promoting private participation.


Indian States shows that the index value for AP for 1995 was almost close to all

India (i.e.100) and it was ranked 10 among the fifteen major States. In 2000, the

index value and rank of the State had improved marginally to 103 and 9 respectively

(Dev and Ravi, 2009)

5.2 Industrial Unrest

Yet another important measure of the existence of good SBRs is the absence of

industrial unrest. Appendix 14 and 15 show that there is no industrial unrest in the

State of AP. This is further complemented by the primary survey analysis.

SBRs and Industrial Relations in AP

In the State of AP, all the firms said that cordial relations exist between the

management and the workers. Trade unions do exist, employees are members of the

trade unions, but, whatever problem arises, they are sorted at the firm level itself.

No firm has cited a major problem associated with labour. This is in tune with our

secondary data analysis on industrial unrest. However, our interaction with the

Centre of Indian Trade Union (CITU) President reveals that there is a decline in the

role of the trade union due to contractualisation of labour and suppression of trade

union rights. The President16 strongly feels that the government is playing the role of

pro management rather than pro worker. To cite an example, the contract labour act

has been amended to recruit contract labour even in core sector. Further, the

minimum wages which used to be revised once in two years has been amended and

made once in five years. Earlier, seven members were required to form a registered

TU, but, now, 100 or 10 percent of the total work force is required to register as a

TU. As a consequence, the TUs are not strong enough to fight with the management

for their rights.


In AP, SBRs have evolved gradually under different political regimes – from

‘indifferent’ SBRs during initial decades (Sanjeeva Reddy period), passing through

16 Interview with Sri Veeraiah,, CITU, August, 2009


critical junctures (during K. Brahmananda Reddy and Vengal Rao tenures) in the

form of ‘active’ and ‘pro-active’ phases and finally SBRs reaching a high point during

Chandrababu Naidu’s tenure and there after continuing in the Congress regime. The

shift in the political regimes’ approach to the SBRs is positively correlated to the

political economy of change in the post-green revolution period. Two critical factors

in this process are the emergence of a market savvy agrarian class and the

emergence of a modern middle class as a result of the expansion of the modern

education; the proclivity on their part to look for alternative avenues of investment

played a key role. The government’s initiatives, both institutional and financial, seen

since the 1960s corresponded to this scenario.

Thus, from the lens of historical and institutional perspective, we attempted to

examine the performance of the manufacture sector which in turn affected economic

growth. Examination of the secondary data reveals the dominance of registered

manufacturing in the total manufacturing output of the State. However, the growth

in the output did not contribute to increase in the employment in this sector. The

growth rates of employment in the manufacturing sector increased in the second

period (1991-2001) over the first period (1981-1991), however, this increase is

contributed by the unorganised sector. From the employment viewpoint, there is no

harm, if unregistered sector employment increased, as long as the wage differential

between the two sectors is not significant. Our data on GDCF shows that during

nineties and early 2000, creation of assets is more in the private sector as compared

to the public sector. This signals the pro-business attitude of the State government.

The situation of investment is also improving considerably. The Socioeconomic

survey of 2008-09 reports: ‘after introduction of industrial policy in 1991, up to 31st

March, 2009, the State has received IEM 6,630 proposals with an investment of Rs

4,16,304 crores providing employment to 11,08,607 persons. Out of the above

proposals, 2,883 have already gone into production. The State has received Rs12017

crores of FDI inflows as equity from January 2005 to September 2008.”

Our primary survey analysis shows that out of the various services provided by the

business association, providing information on government regulations is the most

useful for the firm. Incidentally, we find that joining a business association is

particularly useful for the large and medium scale firms. The survey clearly brings

out the fact that the apex business organisation, FAPCCI, does not do much with


regard to lobbying the government. However, the efforts of ALEAP in this direction

are laudable. But, owing to its limited women membership, it is not able to cater to

the needs of large section of the manufacturers. In this context, it becomes highly

essential, on the part of FAPCCI to lobby with the government apart from

dissemination of information to its members hence becomes cheaper on the part of

the firms. With respect to the firm’s perceptions about the various facilities, such as

roadways, power, water and telecommunications provided by the government,

majority of the firms are satisfied with the facilities provided by the government.

Both the secondary and primary data reiterate that there exist cordial relation

between the management and the labour leading to the conclusion that there is no

industrial unrest in the State. However, our interactions with the trade union leaders

indicate that the rigid laws associated with the formation of trade unions and the

contractualisation of labour may be the reason behind the absence of industrial

unrest in the State.

Overall, our findings support the view that an organised private sector and effective

state business relations are helpful for firm performance, and state business relations

have improved over time in AP. The political environment of the State provides a

market friendly atmosphere and signals the pro-business attitude. The SBRs in the

State will become more meaningful if the small firms are also promoted on par with

the large and medium scale firms and if the following policy implications are made.

To step up the pace of state business relations, the government should take steps to

provide the best infrastructural facilities to make the State the manufacturing hub for

national and international companies. Since the majority of the investment projects

in the State are remaining at an announcement stage, there arises the need to set

up a special nodal agency with powers to settle issues affecting the investment

projects in the State. For small and mega industries, the government should make

the allocation of funds towards incentives for industrial investment promotion policy,

provide rebate on power tariff, set up exclusive industrial parks in those sectors

which provide employment opportunities, allocate at least 15-20 per cent of land for

Micro, Small and Medium Enterprises (MSME) sector and help in reviving sick SSI

units. For the uplifting of the workers, the minimum wage revision period should be

made once in two years rather than once in five years and also provide employment

security to the workers.



Arup Mitra, Prasad Sankar Bhattacharya (2006) ‘Industry - Urban Nexus,

Employment and Poverty: A Quantitative Assessment’ in Suresh D Tendulkar, Arup

Mitra, K. Narayanan, Deb Kumar Das India: Industrialisation in a Reforming Economy

Essays for K L Krishna, Academic Foundation, New Delhi

Baru, Sanjaya,(2000), ‘Economic Policy and the Development of Capitalism in India:

The Role of Regional Capitalists and Political Parties’ in Francine Frankel, et al (Eds),

Transforming India: Special and Political Dynamics of Democracy, OUP, Delhi.

Bannock 2005 ‘Reforming the Business Enabling Environment: Mechanisms and

Processes for Private Public Sector Dialogue, DFID

Basu, Gautam Kumar (1991), The State, Government and Military Intervention, New

Delhi: South Asia Publishers

Bhattacharya, B B and S. Sakthivel (2004) ‘Regional Growth and Disparity in India

Comparison of Pre and Post Reform Decades’, Economic and Political Weekly, March

6, 2004, Vol. XXXIX

Chakravarty Deepita and G. Alivelu (2009), ‘Industrial Development in Andhra

Pradesh: A Regional Perspective’ in S. Mahendra Dev, C. Ravi and M.

Venkatanarayana (eds.) Human Development in Andhra Pradesh – Experiences,

Issues and Challenges, Centre for Economic and Social Studies, Hyderabad

Chingaipe, Henry and Adrian Leftwich, ‘The Politics of State-Business Relationships in

Malawi’, IPPG Discussion Paper Series Number 7, June 2007 available at

Dev Mahendra and C. Ravi, (2009) ‘The Economy of Andhra Pradesh’ in S. Mahendra

Dev, C. Ravi and M. Venkatanarayana (eds.) Human Development in Andhra Pradesh

– Experiences, Issues and Challenges, Centre for Economic and Social Studies,


Elliot, Carolyn, (1970), `Caste and Faction among the Dominant Castes: The Reddies

and Kammas of Andhra’ in Rajni Kothari (ed), Caste in Indian Politics, Orient Long

man, New Delhi.

Gerschenkron, Alexander (1962) ‘Economic Backwardness in Historical Perspective’

Cambridge, Mass.: Harvard University Press.

Glaeser, E.L., H.D. Kallal, J.A. Scheinkman and A Shleifer (1992), “Growth in Cities”,

Journal of Political Economy, 100, Pp. 1126-1152.

Goldar, B.N. ( 2000), ‘Employment Growth in Organised Manufacturing in India,

Economic and Political Weekly, April 1.


Government of Andhra Pradesh, (1996a), `State Finances – The Actual Position’,

Finance and Planning (FW) Department, June.

--- (1996b), `Pattern of Expenditure on the Welfare Sector’, June.

--- (1999), Andhra Pradesh Vision 2020, Hyderabad.

Groot, H.L.F. de, G.M. Linders, P. Rietveld and U. Subramanian, (2004), ‘The

Institutional Determinants of Bilateral Trade Patterns’, Kyklos, 57, 1, pp. 103-123.

Harris, J. (2006) ‘Institutions and State-Business Relations’ IPPG Briefing Note 2,

available online at

Herzberg Benjamin and Andrew Wright (2005) ‘Competitiveness Partnerships: A

Resource for building and maintaining public-private dialogue to improve the

investment climate, drawn from the review of 37 countries’ experiences’, World


Kennedy, Loraine (2004), ‘The Political Determinants of Reforms Packaging:

Contrasting Responses to Economic Liberalisation in Andhra Pradesh and Tamil Nadu’

in Rob Jenkins (ed), Regional Reflections: Comparing Politics across India’s States,

OUP, Delhi.

Krishna, K L (1989) ‘Industrial Development’ in J. Mahender Reddy, M. Yadav Reddy,

K.S. Upadhyay and Ch. Raghuram (eds.) Industrial Development in Andhra Pradesh,

Sterling Publishers Private Limited.

Leftwich, A. (2006) ‘What are Institutions’ IPPG Briefing, No. 1 available online at

Naidu, Chandrababu with Sevathi Ninan, (2000), Plain Speaking, Vikas, Delhi.

Olsen, Wendy K (1989) , ‘Eat Now Pay: Later Impact of Rice Subsidy Scheme’,

Economic and Political Weekly, July 13.

Polanyi, Kart (1957), The Great Transformation, New York, Monthly Review Press.

Qureshi, M. and D.W. te Velde (2007) ‘State-Business Relations and Firm

Performance in Zambia’ IPPG Discussion Paper 5 available online,

Rao, C V Subba (2007), Hyderabad: The Social Context of Industrialization, 1875-

1948, Orient Longman, Hyderabad.

Reddy, DN (ed), (1999), Vision 2020: Myths and Realities, Sundarayya Vignana

Kendram, Hyderabad.


Reddy, G Ram (1989), ` The Politics of Accommodation: Caste, Class and

Dominance in Andhra Pradesh’, in Francine Frankel and MSA Rao (ed), Dominance

and State Power in Modern India: Decline of a Social Order, Volume I, Oxford

University Press, Delhi.

Reddy, Sudhakara (1989) ‘Industrial Performance’ in in J. Mahender Reddy, M. Yadav

Reddy, K.S. Upadhyay and Ch. Raghuram (eds.), Industrial Development in Andhra

Pradesh, Sterling Publishers Private Limited.

Rodrick, Dani and Arvind Subramanian (2004) ‘From Hindu Growth to Productivity

Surge: The Mystery of the Indian Growth Transition’, Mimeo, Harvard University.

Rosen, George (1988), ‘Industrial Development in Three South Indian States:

Acceleration and Deceleration’ in Muniratna K Naidu (ed.) Industrialization and

Regional Development in India, Reliance Publishing House, New Delhi.

Sen, Kunal and D.W. te Velde (2007) ‘State Business Relationships and economic

growth in sub Saharan Africa’. Draft IPPG paper

Sinha, Aseema (2006), The Regional Roots of Developmental Politics in India, New

Delhi: Oxford University Press

Srinivasulu (1994), `Handloom Weavers’ Struggle for Survival’, Economic and

Political Weekly, September 3.

--- (1999a), `Political Realignments in Post-NTR Andhra Pradesh’ (Co-authored with

P Sarangi) Economic and Political Weekly, Vol. XXXIV Nos. 34-35, August 21-28.

--- (1999b), `Regime Change and Shifting Social bases: Telugu Desam Party in the

Twelfth General Elections’, Ramashray Roy and Paul Wallace (Eds), Indian Politics

and the 1998 Elections: Regionalism, Hindutva and State Politics, Sage, Delhi.

--- (2004), ‘Political Articulation and Policy Discourse in Elections, Andhra Pradesh,

2004’, Economic and Political Weekly, Vol. XXXIX, No 34, August 21.

Te Velde D.W (2006) ‘Measuring state-business relations in sub-Saharan Africa’.

IPPG Discussion Paper4 available online,

Upadhya, Carol (1988), ‘The Farmer-Capitalists of Coastal Andhra Pradesh’,

Economic and Political Weekly, Vol. 23, July 2 and 9: 1376-82; 1433-42.

Upadhya, Carol (1997), `Culture, Class and Entrepreneurship: A Case Study of

Coastal Andhra Pradesh, India’ in Mario Rutten and Carol Upadhya (Eds), Small

Business Entrepreneurs in Asia and Europe: Towards a Comparative Perspective,

Sage, Delhi.


Vaidyanathan. A (1995) ‘The Indian Economy – Crisis, Response and Prospects’

Orient Blackswan

Venkatramaiah, P and L.G. Burange (2003) ‘Structure and Growth of Industry’ in C H

Hanumantha Rao and S. Mahendra Dev (eds.) Andhra Pradesh Development

Economic reforms and the challenges ahead, Centre for Economic and Social Studies,


World Bank (1996), `Document on Economic Reforms in Andhra Pradesh’,

September 11.



Appendix 1: Data and Methodology for Secondary and Primary Data

In order to capture the performance of the manufacturing sector in AP, we have to

look mainly at two crucial variables relating to this sector such as employment and

output. National Accounts Statistics (NAS) published by the Central Statistical

Organisation (CSO) provide time series data for net state domestic product (NSDP)

in terms of broad industrial classifications at the single digit level. From this source,

it is easy to get the output figures at the state level. The total employment figures

are available in the Economic Tables of the Decennial Census.

The period for analysis chosen for studying the output variable is 1980-81 to 2005-

06. Currently, the data for state domestic product (SDP) are available in 1980-81

prices for the period 1980-81 to 1997-98. Another series is available from 1993-94

onwards till 2004-05 in 1993-94 prices. In order to get continuous data, researchers

have converted the data with 1980-81 as a base to conform to 1993-94 prices

(Bhattacharya et al 2004). However, the definitions used in constructing the 1993-94

wholesale price index are considerably different from those used for the construction

of the index numbers with 1980-81 as base. As this difference of definitions can

influence the numerical values to a considerable extent, it was decided not to

combine the two series (Chakravarty and Alivelu, 2009). Since our objective is to

look into the performance of the manufacturing sector, we decided to narrow down

our focus. The data set for the registered manufacturing sector is provided by the

Annual Survey of Industries (ASI) published by the CSO. The wholesale price index

numbers with 1981-82 as base for the first period were used for deflating the net

value added and the emoluments. We have deflated the fixed capital figures by an

index of machine tools. In order to calculate the trend growth rates we have fitted a

semi-log equation.

The sampling method adopted for the field work is as follows: We concentrated on

the organised manufacturing only. The problem we have in hand is to (a) classify the

sectors and then to (b) classify the firms.


(a) ASI classifies the sectors under manufacturing at the two digit, three digit and

in some cases even at the four digit level. We propose to take up the

relatively broader classification following the two digit level. We first classified

the sectors on the basis of labour capital ratio. For the sake of convenience

we considered only the latest year. The sectors will be classified in terms of

labour capital ratio as high (H) and low (L) taking the state manufacturing

sector average labour capital ratio as the dividing bar.

(b) Secondly the sectors were again classified by their levels of total factor

productivity as high (H) and low (L) taking the manufacturing sector average

for the state as a whole as the benchmark. This two way classification gives

us a four fold classification of all the sectors such as HH, HL, LH and LL. From

these four fold classifications we can possibly choose those sectors which

constitute at least five per cent of the total manufacturing net value added of

the state. This way of classifying the sectors is likely to ensure sufficient

contrast for comparison.

Finally we categorised the sectors based on TFP and labour capital ratio as High-

High; High-Low: Low-High and Low-Low. Based on the percentage share of net value

added and the above specified methodology the sectors that we selected in AP are

Manufacture of Food Products and Beverages (15); Manufacture of Machinery (29);

Manufacture of Chemical and Chemical Products (24), Manufacture of Basic Metals

(27); Manufacture of Coke, Refined Petroleum Products and Nuclear Fuel (23)

(c) The second task ahead of us was to decide the criteria of selecting firms

within the selected sectors. This is a more difficult task as the details about

the firms under each sector may not be readily available. However, this

problem was sorted out by classifying the firms based on the size in terms of

employment and age in terms of year of establishment.

Total Factor Productivity

Higher than the State Average


Lower than the State Average


Labour/ Capital



Than the

Machine tools

Percentage share in the NVA:

Food products

Percentage share in the NVA:






Number of firms selected: 1

Size: small


Number of firms selected: 5

Size: small

Labour/ capital


Lower than

the State

Average (L)

(a) Chemicals

Percentage share in the NVA:


Number of firms:3

Size: One large, one medium,

one small

(b) Basic metals

Percentage share in the NVA:


Number of firms:5

Size: two large, two medium,

one small

Manufacture of refined coke


Percentage share in the NVA:

7.72. Firms in this sector could

not be covered because of

negative attitude of the firms

Appendix 2: Industrial Licenses issued to different states in India 1965-76



























AP 24 19 11 4 6 13 37 30 29 61 61 51

Gujarat 39 33 29 23 16 39 66 57 78 89 97 83



59 29 18 7 12 36 51 36 64 99 141 61



134 109 100 66 80 112 162 131 183 265 255 143

Punjab 24 31 16 14 7 39 45 52 44 107 109 52



64 42 48 34 62 46 81 54 47 107 74 56

Bihar 61 53 23 12 7 22 24 18 9 24 15 17

Orissa 5 8 2 2 3 4 7 4 0 12 10 7

Source: Reproduced from Raychaudari, 2007


Appendix 3: Productive capital, employment, gross output and value added in

select few states in 1964 (percentage)

State Productive


Employment Gross output Value added

Maharashtra 17.29 19.83 24.11 25.62

West Bengal 19.65 22.00 21.77 22.29

Madras 7.74 8.39 8.18 8.51

Gujarat 6.47 8.63 8.30 7.97

Bihar 6.98 5.58 6.70 6.98

Uttar Pradesh 7.25 7.33 6.92 5.89



4.00 5.00 3.50 3.00

Total for seven


69.38 76.76 79.48 80.26

Source: Naidu, 1965

Appendix 4: Letters of Intent and Industrial Licenses (IL) issued to different states

in India, 1983-1991



1983 1986 1989 1991


AP 79 63 111 40 103 37 58 12

Gujarat 115 115 105 86 133 49 101 34

Tamil Nadu 68 76 104 61 119 44 68 28

Maharashtra 155 171 173 96 198 72 173 54

Punjab &


113 228 104 73 119 29 64 21

West Bengal 45 71 42 21 33 14 28 3

Bihar 30 9 18 9 15 5 7 5

Orissa 25 14 17 12 24 4 12 6



Appendix 5: Gross Fixed Capital Formation by Type of Institutions

Year AP All India

Public Private Public Private

1995-96 5967








1999-00 9853








2000-01 11063








2001-02 13183








2002-03 11522








2003-04 12889








2004-05 14934








2005-06 19889








Source: Directorate of Economics and Statistics, AP and CSO New Delhi


Appendix 6: Real Fixed Assets Per worker by States (Rs)

Formal (capital formation) Informal without DME State Informal with DME

1989-90 1994-




















154316 25454


235606 4089 5243 10281 - 5970 11501

Gujarat 243629 44301


889661 15867 20156 31311 - 19859 32146



186539 26034


500914 5622 7611 13696 - 8345 16247



300772 41727


564624 10982 18932 29033 - 28445 35614

Orissa 590072 76158


790651 1916 1751 3372 - 2073 3729



178805 27352


276399 5403 4509 18619 - 6906 23618



181678 33596


258653 2912 3227 6353 - 3820 7894



240626 18505


441981 6828 6739 15043 - 16592 18964

Source: ASI and NSS 5

Appendix 7: Some Selected State wise Granted Industrial Licenses and Investment,

Employment Proposals in India during August 1991-February 2008

State No.s




(Rs. In crores)




AP 511






Orissa 37






WB 101






Maharashtra 586






Gujarat 465






Tamil Nadu 850






Karnataka 270







Note 1: figures refer to the Letter of Intents and Direct Industrial Licenses

2. Percentages are given in the parenthesis


Appendix 8: Total Employment in 1981, 2001



Sectors 1981 2001

22 manufacture of tobacco and tobacco


14.83 19.80

23+24+25 manufacture of cotton textiles, jute, hemp,

wool, silk, synthetics fiber textiles

17.78 16.10

26 manufacture of textile products(including

wearing apparel other than footwear)

11.04 12.60

27 manufacture of wood and wood products,

furniture and fixtures

12.98 12.66

32 manufacture of non-metallic mineral


8.89 5.27

Source: Census of AP, 1981, 2001

Appendix 9: Labour Productivity in AP during 1980-81 to 1992-93 in Registered


























Source: Calculations based on the data from ASI, Govt. of AP, Various Issues


Appendix 10: Labour Productivity in AP (1993-94 – 2003-04) in Registered






















Source: Calculations based on the data from ASI, Govt. of AP, Various Issues

Appendix 11: Annual Gross Value Added per Worker (In Rs.) by States/UTs

(Product Approach), 2001

State GVA (in Rs. Per worker)

Rural Urban

Andhra Pradesh 9324 18637

Gujarat 16987 34643

Karnataka 10403 21055

Kerala 16484 28422

Orissa 4814 15138

Maharashtra 15128 33025

Uttar Pradesh 10083 18923

West Bengal 10216 19539

Tamil Nadu 11979 22740

India 11120 25598


Appendix 12: Relative Share of Number of Factories, NVA, Fixed Capital and

Number of Employees of Select Factory Sector (2-Digit Classification) 2003-04


Industry No. of


Net Value


Fixed Capital No .of


food products

and beverages


44.50 14.61 17.52 18.12

tobacco (16) 2.97 7.41 1.07 13.08

manufacture of

coke, refined


products (23)

0.28 7.72 6.36 0.19


products (24)

5.83 19.37 15.21 6.10



products (26)

17.39 8.30 14.42 20.97

basic metals


2.91 13.19 20.95 3.24

machinery (31) 1.74 5.61 2.08 2.50

Source: ASI, Government of AP, 2003-04


Appendix 13: Road Length per 100 sq. km of area for select states of India

1980-81 1989-90 1990-91 1995-96 As on 31st



As on 31st



AP 45.73












Gujarat 29.63












Karnataka 57.25












Maharashtra 57.58












Orissa 76.51












Tamil Nadu 95.31












West Bengal 63.85












All India 46 64.1 65.2 73.03 76.8 74.73

Source: Statistical Abstract of AP, Directorate of Economics and Statistics, Govt. Of

AP, Various Issues

Appendix 14: Number of Strikes normalised by the number of factories for some

selected states in India

1980-81 1988-89 1995-96 2000-01 2004-05

Factories Strikes Factories Strikes Factories Strikes Factories Strikes Factories Strikes

AP 11155






18500 120


14029 27


15572 20


Gujarat 11208 241


11103 169


13770 105


14090 67


13603 29


Karnataka 5381 44


5649 52


6701 18


7010 33


7596 4


Maharashtra 15576 267


15127 108


20536 89


18528 26


18912 7


Orissa 1563 116


1430 50


1790 42


1665 21


1749 3


Tamil Nadu 10292 277


13099 194


19895 120


20601 109


21053 59


West Bengal 6359 185


5419 42


6482 12


6091 22


6105 20


Source: (1) Indian Labour Year Book, Govt. Of India, Ministry of Labour and

Employment, Labour Bureau, Several Years

(2) Annual Survey of Industries, CSO, Several years


Appendix 15: Number of Lock Outs normalised by the number of factories for some

selected states in India

1980-81 1988-89 1995-96 2000-01 2004-05

Factories Lock


Factories Lock


Factories Lock


Factories Lock


Factories Lock


AP 11155






18500 139


14029 46


15572 4


Gujarat 11208 17


11103 19





14090 8


13603 7


Karnataka 5381 7


5649 13





7010 10


7596 2


Maharashtra 15576 23


15127 69





18528 6


18912 2


Orissa 1563 10


1430 7





1665 5


1749 3


Tamil Nadu 10292 34


13099 20





20601 40


21053 15


West Bengal 6359 146


5419 138





6091 155


6105 185


Source: (1) Indian Labour Year Book, Govt. Of India, Ministry of Labour and

Employment, Labour Bureau, Several Years

(2) Annual Survey of Industries, CSO, Several years