Posted by: John Elliott | December 18, 2009

Hyderabad sinks from software to scams

India’s southern city of Hyderabad is becoming one of India’s most potent symbols of the greed and corruption that link politicians and businessmen. For the third time in a year, the state has been rocked by a crisis that exposes those linkages – this time over whether Andhra Pradesh should be split in two with the creation of a new state of Telangana based around Hyderabad (white area in map below).

This is a far cry from the glory and international fame of the past 15 or so years when this prosperous capital of the state of Andhra Pradesh became an international symbol of India’s dramatic growth in software, second only to Bangalore as a thriving location for information technology investment. Companies located there include Google and Microsoft, and Bill Clinton visited as US president.

The first of the state’s crises came a year ago with the collapse of Satyam, a leading Hyderabad-based software company that was owned by the family of its then chairman, Ramalinga Raju. The Rajus were closely linked with various politicians, including the state’s Congress chief minister, Y S Rajasekhar Reddy (YSR), who died in a helicopter crash in September, as well as his predecessor, Chandrababu Naidu.

Politicians are widely believed to have invested their black money in both Satyam and in Maytas Infrastructure, an associated company that received favours on contracts from the state government and drained funds out of Satyam. Both companies (Satyam has now been sold) are now being investigated for massive fraud, and Raju has been detained in jail since January.

Next came YSR’s sudden death and an immediate attempt by his politically inexperienced 37-year old son, Y.S.Jaganmohan Reddy, to become theief minister.

Businessmen like Raju came from Andhra’s coastal regions. They mostly belong to the Reddy and Kamma upper castes that must now be ranked along with India’s more famous business castes and communities such as the Marwaris of the north and the Chettiars of the south.

The Telangana people’s wish for some sort of constitutional identity has been around for over 50 years, and has been fudged and rebuffed by successive Indian governments. But last week (December 9) the central government gave way and agreed to create Telangana in order to end a fast by a local politician and activist, K. Chandrashekhar Rao (KCR), leader of Telangana Rashtriya Samiti, who was risking his life to revive his crumbling political image.

That humane but politically clumsy decision led to violent demonstrations in Hyderabad, plus resignation threats by about half the members of the legislative assembly. This paralysed the state government and sparked follow-on bifurcation claims from other states all over India.

But observers of India’s frequently muddled and confusing political scene need not fear any imminent Balkanisation of India’s 28 states. Having prevented the death of the fasting politician, the government is back to fudge, and hopes to stall the Telangana claims indefinitely, maybe even until the state’s next assembly elections in 2014. Meanwhile, other states’ claims to be split will be examined, and some may push ahead a little – but there is no crisis, despite blanket and over-excited media coverage.

Unlike most other bifurcation claims, the battle over Telangana is about wealth, not language or ethnic divisions, nor dramatic differences in geography. It would also the first time that the capital of a state has gone with the new entity – normally the breakaway has to start afresh.

The people of coastal Andhra have benefited economically since the days of British rule when there was extensive investment in irrigation, but the Telangana region lagged behind under the thumb of the Nizam of Hyderabad. When Hyderabad began to flourish in the 1990s as an IT centre, wealthy landowners from the coastal region flocked to the city to develop real estate and infrastructure projects, lining up with local politicians such as YSR and his cronies to secure contracts and licences. This is the wealth that they fear the creation of Telangana would put at risk.

The reputation of Hyderabad and Andhra has been severely damaged by this series of crises. It is causing concern among both Indian and international investors who had not known – or had ignored – the political-business linkages and scams.

The state now has an uncertain political future. The death of YSR has removed an able political leader who was an effective Congress chief minister. Now the Congress Party is split over who his successor should be, as well as over the Telangana issue.


  1. Well said Mr. Elliott…Thanks for your journalism ethics; for understanding and reporting the unreported facts and truth behind the development of Hyderabad, and the political clout hindering the formation of a Telangana state.

  2. I am so glad that Elliott has exposed what was perceived of AP as a great development. CBN and YSR probably the most corrupt CMs of India amassed 1000s of crores for themselves and their kith and kin and mostly to their two respective castes Kammas and Reddys and unleashed a new form feudalism in AP and destroyed the lives of people at the bottom of the society. Telangana region and Hyderabad was looted by these so-called crony entrepreneurs like Lagadapatis, Rayapatis, Reddys etc. No wonder these modern-day sophisticated looters oppose anything other than status quo and Telanana state for sure. It is high time these new avatars for feudal lords be punished like Mr. Raju and some sanity to free markets/private sector are brought into effect. Breaking AP into smaller states is definitely a wiser idea which will do lot of good to people of lower strata on both sides.

  3. The article is very helpful, thanks John. We have some business activity in Hyderabad and I have been aware of the deep linkages of politics and business in the state. This article clarifies the fuss around Telengana, which I was desparately seeking.

  4. Very true… it is corruption and exploitation by certain community sply in real estate business leading to total mess.

  5. Very informative. This puts the current crisis in perspective. Thanks.

    There was also an interesting editiorial in the Hindu of December 9th titled “Correct diagnosis, wrong cure”. It said: “The problem of uneven regional and intra-State development is one of the major challenges rising India faces but there is little to suggest that smaller States will make for a more even process of development”

  6. These days when USA white house has maoist photograph, one never know who the author is. Politics have become so dirty that i have not checked whether AP is one or two states as of today.

    But here is why the author seems to have an agenda :

    1- While there is corruption in AP, a lot of it was converted to futuristic modern ideals by worthless journalists. Though I give A to Mr C Naidu, he was even celibrated like a god.

    Through all this fervour, there was little bit of My Andhra feeling. So, the opposition to what you considered your state is obvious. White europeans would go to war if linguistic states are devided.

    The article failed to mention nostalgia, on the other hand it brought in caste issue.

    The telengana “demand” is like all demands in India, you would have to go to british rule to find its roots. You have genuine demands crushed, these ones instigated to high decibel level.

    The telengana “demand” is actually machinations of british ideas, based on their f….d up understanding of races and castes. Some in India would do it to get published in western journals. Add to that, the Reddies and Commas are upper castes who were not so upper castes in the wars that was instigated years ago. A lot of these people took oppurtinity in ‘egalitarian’ and ‘modern’ ideals.

    Compare the centuries old f….d up understanding of western racists on India, check the census of telengana and the fact the caste issue is raised onto groups who progressed with ‘modern’ institutions – You get propaganda article.

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  8. It is a great article and factual description of un-biased account of Andhra Politics. An outsider, some may say about Mr Elliott, but he lived with us for so many years, he knew everything ! I met him personally and his understatnding of our politics is excellent. Our friends including the great fans of Telangana and Andhra should realise that the present crisis has damaged the pride TELUGUs. Let us separate in cordial atmosphere, as any further action in this situation can only aggravate the present atmosphere. I once again congratulate Mr Elliott.

  9. Having lived in Hyderabad from 2005 – 2009 and having worked at Satyam, I can say what you wrote is quite accurate and timely.

  10. Great article….and most of it is undeniably factual.

    Sorry to see some poor comments of the people who cannot differentiate between patriotic love for the state and the actual reality. No single person would greatly benefit from this division except for power hungry politicians. If it happens I can see telangana going 10 years back with same level of poverty and destitute lives of its people.

  11. Isn’t it interesting that Mr. Elliott managed to select comments that didn’t “refute” his pitiful interpretation of “corruption” in AP politics to showcase above. Someone should be investigating these so-called reporters. I agree with Vishnu’s comments. He’s hit it on the head. Vishnu, I am a resident of Bombay now, having lived in Kurnool & Hyderabad for a few years. I cannot agree with you more. Every time I return to visit my relatives in Kurnool, I am touched by the programs YSR put in place for the poor. People can allege all they want, they have to also rationalize that progress at the very poor segments cannot come about just driven by greed, the leaders have to have some vision, which YSR had. The state was on a decent growth trajectory & I would take that over politicians who hoarded their coffers, paving the roads to their homes with gold and leaving absolutely no trace of the benefits of their power on the poor & neglected. I despair that we don’t have anyone to fill his shoes now.

    If anyone can find comments on other sites that don’t agree with what I have written, please do bring them across here! Or message me with the link – je

  12. How did John Elliott ever become a journalist for the FT? His sweeping statements about Jagan being “power hungry” and pursuing the CM’s post immediately following his father’s death are absolutely irresponsible. He has to substantiate what he avers. What does he mean that Jagan pursued the CM’s post following his father’s death? Does anyone have any mercy for a person having lost a beloved parent in the most tragic manner? People close to Jagan state that he is still unable to reconcile with his father’s death.
    There are many vested interests going haywire with various agendas, how come none of them come across as opportunistic? When Jagan was pressed for a statement from some press folks about a United AP got a response from him that he doesn’t want to play into the politics of the situation now but would rather think through the ramifications of what this means for AP in the long run, economically & socially. What he actually meant by it, we may not know, but that’s what he said and that’s what deserves to be reported.
    This is such superficial and crude understanding of AP’s political dynamic. He’s chosen the armchair journalist’s way out. He’s not an investigative reporter, he has no right to write such articles about YSR or his family. How does he claim that YSR enabled so many Tatas & Birlas and wealth creation (which is great) except, there isn’t that much wealth to be created! Or else, you can bet the Americans would be out there to get a piece of it! It’s a poor state with limited resources and big dreams. YSR did what he could to forge together a progress that included those at the bottom of the pyramid, maybe all those programs were funded out of John Elliott’s pocket. There has to be some rationale to these allegations. Who is he to allege these things sitting in Delhi? When has he covered AP Politics? He joins the bandwagon of all the other wannabe journalists who call themselves reporters. It’s high time people got up from their chairs and traveled the state they purportedly want to criticize.

  13. Very emotional topic as seen from the comments.

    Hyderabad had been developed by politicians not realising this might happen. So it is almost like a tsunami for some of Andhra which is understandable. Some have almost found the soil underneath their feet moving overnight.

    This need to be tackled sensitively as it can spin off quickly into one side pitted against other with traumatic consequences. The fight seems to be for Hyderabad rather than other parts of Telengana which is not surprising..
    Probably the time has come for major cities to be treated as separate city states rather than milking cows as in mumbai, bengaluru etc. Separate city states lead to more accountability over infrastructure and development like Delhi .Otherwise majority in legislature is obtained from constituencies in the districts and cities are abused as revenue sources leading to slums and poor security as the present state.

  14. @United Andhra – care to explain why the author is a “crook”? This has been in public knowledge, however the partisan media has never been able explore this aspect of systemic plunder by certain politicians. Even Satyam scam was under the radar for these media outlets until reported in business magazines.

  15. Thanks for exposing these people. In India Politics has began a game of power and money. God only knows how much money has been siphoned off from the country by these political and industrial goons. Time has come to expose and punish them

  16. This article seem to be paid one like the one written in Mail Today

    this ought to go into the spam box – or to a lawyer – but I’m running it so that readers can see the level of criticism! je

  17. Well, the author may be a “crook” but this piece at last explains lucidly what is behind the antics in AP for those of us who cannot make head nor tail from a distance of what is going on. It would have been rather more interesting to know from “United Andhra” (see comment below) his/her/their view of what the people and politics of AP are all about rather than just have this cheap insult as a comment.

  18. There are several comments on other websites where this post has been picked up and run.
    They include this site:

    “GOOD. We deserve this for the foolishness of the people and the sentiments of the people for falling prey to KCR like goons and assholes………..”

    “Again ongoing agitation are results of few politician/business who have thousands of crores of business around Hyderabad. In Satyam cases Raju for his personal benefits and with the support of few politicians played with tousands of peoples lives who were employed in Satyam and bought AP/Hyderabad image down. Now Lanco Rajagoal for 7000 crore estate and JCD Reddy for his transport company trigerring all these agitations……..”

    “Politicians are always like this…You have mentioned names from one side but all are like this. You know how much YSR and family gathered while is in term. It counts to some thousands and thousands of crores. Personally I will never trust anyone.
    Who knows the people who bought/have lands in Vijayawada or Vizag are paying KCR for his hunger strike so if Telangana forms, Vijayawada or Vizag will be the new capital and the real estate prices will soar like they did Hyderabad. I will not be surprised if I came to know that KCR has all the benamy lands on his name in these cities.
    I don’t think the so-to-be leaders of new state will be any better than the present ones but Smaller states will have less chance of exploitation and are more visibile so ultimately more possibility of development all across.”

    “Now i saw a post where that person said a valid thing….Its NIZAM state. we have taken away from them…All muslims in HYD are waiting for time…they will start a row for a seperate state which was taken away from them… its their right??… there were too many attrocities on muslim population…their sentiment is hurt…they were manipulated by all Telangana, Rayalaseema, Andhra political leaders… NOW they want their right of their own state NIZAM…. wait and see how MIM and other Minority leaders will react.”

    And this one

    “I’ve never read a more scathing article on the vile nature of Indian politics and its overt and covert nexus between Andhra politicians and their business cronies. Instead of granting contracts to reputed firms, these guys have floated their own business entities to swindle the wealth of the India and AP. No wonder Sonia and others were finding that they were getting too powerful to handle and could rock the politican landscape in the years to come. The Hyderabad housing bubble is now officially popped. Buyers can now breathe in peace.”

    And here

    “an interesting view point of an outsider of how AP continues to be ‘looted’ from inside out over the years”

    “Even a foreigner has pretty good comprehension what the truth and reality are.Here is another of his articles on Corruption and nexus between State politicians and Business interests: http://ridingtheelephant.wordpress.c…er-governance/”

    “All I can say reading those undoubtedly true accounts is that we as a people must be the most patient (for things to improve for the better), most hopeful, most tolerant in the world, and God knows when that patience, hope and tolerance will reach its endpoint.”

  19. I found this article unbiased & factual presentation on the current issues in Hyderabad

  20. Well said. It is always economics and greed. It always will be. Division of the state would be a good move. It may or may not bring about any great development in the region of Telangana but it will at least expose the cronies who are looting the state.

  21. Author is an crook does not understand the people or politics of AP.

  22. I just read one of your “Propoganda” article in FT written around June about rigging in West Bengal elections. Fair enough…..though coming from a foreigner is a bit surprising …..but my point is in the article you have mentioned “low caste village”. Now tell me “sir/mate” , where exactly is this “low caste village”, do you have a name or address. Why do you western journalist always after Caste system in India or, is it the same thing why you always critisise China for not having Democracy. Now all western countries are ready to lick China’s ass when need be. Its good that China is showing these countries their right place in the world. Specially European chimps.

    Your writings are fallacy. There is no place called “low caste village” in India. I am sure all villages have people of all caste living together. Your blogs and articles are creepy. You must be having some ingrained hatred for India aye……or was your grandmother raped by our freedom fighters in early part of last century.

    Why dont you concentrate on your own countries sick economy. Hahaha Britains economy is going into poo…..good for your kind of chimps…

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