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Local origins of Hyderabad's development
Sanjaya Baru
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November 13, 2007

Part I: The local and global in Hyderabad's development

Part II: Globalisation of Golconda

Well into the 1970s, Hyderabad remained a centre of government, education and public sector industry. While some of the old marwari enterprise continued to thrive, new business from Calcutta and Bombay arrived partly in search of greater industrial peace and cheaper infrastructure. The green revolution changed all that.

When I returned to Hyderabad in the late 1970s and began researching the growth of small enterprise around the city I soon discovered that a large number of units were set up by first generation businessmen.

Based on some sketchy field work and analysis of data collected at the time by the State Finance Corporation and State Industrial Development Corporation I tried to understand the phenomenon of industrial development in Andhra Pradesh, with a special focus on Hyderabad, using the framework of capitalist development elaborated by Maurice Dobb in his famous Studies in the Development of Capitalism.

Dobb's paradigm of the 'really revolutionary way' and the 'less revolutionary way' seemed to describe the different patterns of agrarian change and capitalist development in coastal Andhra, the hinterland of Machilipatnam, and Telangana, a region that was part of the erstwhile State of Hyderabad.

It was clear to me (Baru, 1984) that some of the industrial development around Hyderabad was happening because of public investment and the role of expatriate businessmen. This had no 'local' roots and was not the product of any agrarian transformation around Hyderabad.

This was based on Dobb's 'less revolutionary path'. It was also obvious that some of the new investment around Hyderabad was funded directly or indirectly by public money finding its way into private hands -- a kind of 'State Capitalism' -- with politicians and contractors investing their rentier income extracted from the State. However, it was also clear to me that some of the new first-generation business enterprise coming up around Hyderabad had its roots in agrarian change and 'green revolution' in coastal Andhra. This followed Dobb's 'really revolutionary path' of agrarian capitalism contributing to the growth of industrial capitalism.

It was fashionable at the time for Marxist analysts to write about the crisis of 'semi-feudal' and 'dependent' capitalism and its inability to make the transition from feudalism to capitalism. The highly theoretical 'mode of production' debate glossed over regional variations and ignored the potential for indigenously rooted capitalist development occurring as a consequence of agrarian change, a la Dobb's 'really revolutionary way'.

I argued at the time that it was meaningless for analysts to refer to a so-called 'mode of production in India', for India's political boundary is a meaningless analytical category for the analysis of capitalist development. For a continental nation like India, its developmental experience is regionally differentiated and if Dobb can make a distinction between modes of production and transition to capitalism in England, France and Poland, why should we shy away from recognising inter-regional variations in the transformation of modes of production across India?

Something interesting was underway in Andhra Pradesh, I had argued in the 1980s, and this is manifesting itself in the industrialisation of Hyderabad. While Indian business was till then largely confined to metropolitan India, around the presidency towns of Bombay, Calcutta and Madras and post-Independence industrialisation was largely concentrated in Gujarat, Maharashtra, Tamil Nadu, West Bengal and around Delhi, Andhra Pradesh was emerging as a new centre of industrial development, thanks in part to agrarian change in coastal Andhra. In an essay on regional differentiation in development, Krishna Bharadwaj (1995) observed:

'Certain parts of Andhra Pradesh, Kerala and Karnataka in the south, Haryana in the north, and Gujarat and parts of Maharashtra, have shown prominently dispersed growth � We note the importance of agricultural surpluses in adequate quanta to sustain industrial expansion. The regions sharing some industrial vitality appear to be the ones where agricultural growth has also been promising.'

Before Independence agrarian surplus from the delta districts went largely to Madras and also contributed to the development of towns like Vijayawada, Rajahmundhry and Vishakapatnam. Some of this continued even after Independence as the work of Professor B Sarveshwar Rao on Vishakapatnam and Carol Upadhya (1988) on coastal Andhra showed. The unification of the State, however, helped capital migrate to Hyderabad.

An early and striking example of agrarian surplus being invested in modern industry in the State was that of Nagarjuna Fertilisers launched by a technocrat-turned-businessman, the Late Shri KVK Raju. Mobilising share capital directly from ordinary farmers, he set up a fertiliser plant and built the Nagarjuna Group of Companies. Shri KVK Raju was a pioneer leading a new generation of Andhra businessmen who heralded the transition from agrarian to industrial capitalism in the State.

Hyderabad also benefited from public investment in industry. This had its own positive impact on the growth of small-scale and ancillary industry. Hyderabad, like Bangalore, is a good example of public investment catalysing private investment growth. The public sector played this catalytic role in a variety of ways -- ranging from providing finance, creating demand for goods and services, generating rentier incomes to offering space for the emergence of entrepreneurial talent. One such case deserves mention.

One of the first MPhil thesis I supervised at the University of Hyderabad, in the early 1980s, was on the growth of the pharmaceutical industry in the state. My student, Sharuna Verghis, met several first generation businessmen struggling to compete with large multinationals in the pharma business. One of them, who was functioning out of a small premises in Banjara Hills, was impressed by her knowledge of the industry and offered her a job as an executive in his office.

I encouraged her to take that job on the grounds that this would constitute participatory research. Her little known boss running a little known firm was a former employee of a public sector company now striking out on his own. His name was Dr Anji Reddy. By 1989 Dr Reddy was spearheading a campaign against inclusion of IPRs in the Uruguay Round. By 1999 he was ranked one of the rising stars of Indian business, building a business on the basis of India's adherence to IPRs and taking advantage of the new patents regime.

It is this phenomenon I explored in two separate essays on the dynamics of regional enterprise in India (Baru, 2000 and 2004). In these essays I argued that while public investment and the investment decisions of national big business were important determinants of industrial activity in the post-Independence period, contributing to the industrial development around metropolitan centers; new urban centers like Hyderabad, that were also benefiting from these factors, were also the beneficiaries of a new phase of agrarian change and regionally-rooted industrial development. A more detailed case-study based analysis of such industrial development is soon to be published by journalist Harish Damodaran (2007) of Hindu Business Line who examines the role of the Kamma, Reddy and Raju caste groups in this transition.

My study of inter-regional variations, at the national level, in the growth of business enterprise (Baru, 2004) showed that public investment and the investment decisions of big business groups were not adequate reference points to explain post-Independence variations in the growth and spread of business enterprise across the country. The key variable seems to be agrarian change and the emergence of a rich peasant class in rural areas and of an empowered middle class in urban centers.

To be sure, I concluded, public investment played an enabling role in this transition in a variety of ways: investment in irrigation and the 'industry and infrastructure' of the Green Revolution; investment in urban infrastructure that helped the process of `urbanisation' in western and southern India; 'subsidised' finance and credit and subsidized raw materials from public sector enterprises; 'infant industry' protection; and the political patronage offered by political parties in power.

These factors facilitated the transition from pre-capitalist to modern capitalist forms of production. However, if this process was regionally differentiated then the reason for this was partly to do with historical and geographical factors, but increasingly to do with differences in agrarian change and the emergence of a prosperous middle class both in rural and urban areas.

Regional variations in the process of agrarian change has shaped the pattern of industrial development across the country. This process had enabled a new generation of agrarian capitalists and middle-class professionals to make the transition to capitalist entrepreneurs in some parts, rather than others.

Regions that have not yet experienced high or above-average growth must look within -- that is, to the social, economic and political changes required to foster local enterprise and a local middle class capable of facilitating the process of agrarian change and urbanisation. This is not to suggest that local growth cannot be fostered by external stimuli, including public investment, but that any such external stimuli is likely to make a greater impact when the ground below is more fertile and capable of facilitating growth and development of new enterprise.

Hyderabad's development in the past two decades has happened, I would argue, because Andhra Pradesh had undergone the social, political and economic transition required to foster the growth of business enterprise.

A new era of industrial development and globalisation began for Hyderabad when the city became the centre of a range of new industries, like pharmaceuticals, information technology, bio-technology and so on. Built on the firm foundations of agrarian change, fostered in part by the munificence of 'state capitalism' and rentier capital, further boosted by the arrival of national and global business, Hyderabad has emerged as a major business centre today.

The migration to West Asia and Persian Gulf region and the consequent inward remittances from there have also contributed to the city's development. Just as Kerala's economy was buoyed up by such remittances from a region to which Kerala has been linked through history, so too has Hyderabad benefited from its new relationship to a region with which it has had commercial links for centuries.

While Tamil Nadu has a more robust business relationship with south-east Asia, and Kerala has benefited from the Gulf based remittance economy, Andhra Pradesh has the potential to tap both sources as it goes forward. The recent creation of the Telugu Association of Singapore could help Hyderabad tap more effectively into Singapore's investible capital.

These new links can contribute to the re-development of Andhra Pradesh's maritime economy, with port modernisation and better connectivity between the hinterland and the ports. The proposed high-speed train link between Hyderabad and Vijayawada would not only improve the economics of the international airport in the city, but also contribute to business development in regions around both ends of such a high speed rail corridor.

The emergence of Hyderabad as a centre for knowledge-based development, the proliferation of academic and training institutions, have the potential to create the local foundations of Hyderabad's globalisation in this century.

In fact, the importance of the new international airport project near Hyderabad, as well as its economics, must be viewed within this perspective. This airport was conceived, it may be recalled, not just as a new airport for Hyderabad, but as a major hub for the region and as a likely competitor for Dubai and Singapore.

As India moves closer to a more generalised Open Skies policy, this airport could in fact compete with Dubai and Singapore for business. Just as Mumbai sees itself as a potential international financial centre competing with Dubai and Singapore for business, Hyderabad could emerge as an international airport hub competing with Dubai and Singapore.

In so viewing its potential Hyderabad would once again be spreading its wings, so to speak, to the far corners of the city's original geographical and business reach � namely, from the Straits of Malacca in the East, to the Straits of Hormuz in the West.

The transformation of Andhra Pradesh, the urbanisation of an agrarian economy, the development of new business opportunities locally, and the growing people-to-people and commercial links between Hyderabad and the Persian Gulf region, on the one hand, and Singapore and the south-east Asian region, on the other, have once again spread Hyderabad's wings afar.

Just as the Golconda empire of the past stretched all the way from a rocky Deccan to coastal Andhra, so too does Andhra Pradesh � the new political expression of the Telugus. There is a logic to this undying relationship between this capital city and the coast to the east. They were part of a unified political expression of a people in times gone by as they are today.

To sustain the nascent process of economic development in Andhra Pradesh, the State must continue to invest in its people, in their education and health, in better infrastructure and in more balanced regional development. The State must address the challenge of developmental disparity between the developed and the backward districts. For the process of change to contribute to the overall development of the State it is necessary that there is greater investment in agricultural development, irrigation and infrastructure in the less developed regions of Telangana and Rayalaseema.

One way in which Hyderabad's growth can contribute to the overall development of the region around it would be to develop industrial corridors between Hyderabad and Warangal, Hyderabad and Machilipatnam and Hyderabad and Tirupathi / Bangalore. Urbanisation in the state must be evenly spread across all regions of the State, so that Hyderabad does not become the only magnet and be destroyed in the process.

Like in Tamil Nadu, Andhra Pradesh too needs more urban centres spread out across all three regions of the state, with equally good centers of education and equally good urban infrastructure. In Telangana and Rayalaseema there has to be new investment in agricultural and urban development, with a special focus on irrigation, industry and education. Such decentralized development across the state will benefit Hyderabad by reducing the pressure on space and ensuring that what was once a garden city does not become a concrete jungle.

I do believe that much of the process of change that I have outlined remains to be properly documented and researched, before it is in fact celebrated. Social scientists seem to lag behind journalists in recording the far-reaching social and economic change underway in Andhra Pradesh.


Excerpted from the Waheeduddin Khan Memorial Lecture 2007, delivered at the Centre for Economic and Social Studies, Hyderabad on 30 August 2007.

The views expressed in this essay are purely the personal views of the author.

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