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Ushering in Bangaru Telangana with Credit rating A
Highlights
The World Bank report on the ‘ease of doing business’ disappointed the Telangana State with 13th rank among the States, but the noted India Credit Rating Agency(ICRA) report has made the Telangana, which is said to be the richest state, kept its tag called ‘Rich’, after grabbing the ‘A’ category status.
The World Bank report on the ‘ease of doing business’ disappointed the Telangana State with 13th rank among the States, but the noted India Credit Rating Agency(ICRA) report has made the Telangana, which is said to be the richest state, kept its tag called ‘Rich’, after grabbing the ‘A’ category status.
India Credit Rating Agency has accorded ‘A’ credit rating to Telangna bonds than the one received during the combined AP held A- ranking, which indicates the advantage of bifurcation for Telangana Region. It highlights that State have better prospects, due to robust financial situation of the state government. It is to be mentioned here that credit rating is crucial to attract investments in the State.
ICRA assigns these rankings based on the repayment capacities of State governments of the loans it raises from the national and international agencies. Telangana was put in Category A for the current year.
The noted credit rating agency studied the financial conditions of several States in the country and concluded that Telangana fared better than many of them. The report mentioned the following six points as advantageous to the State:
In recognition of revenue in terms of tax collection, ICRA has given 'A' category status to the Telangana state. Telangana has very good State’s Own Tax Revenue (SOTR).In Telangana the total tax collected on GST/VAT/CST is Rs.22834.54 crores from the formation of the new state i.e 02-6-2014 to 31-3-2015, the Tax collection in Telangana is robust with collection of Taxes under Minor Acts is Rs.893.36 crores, professional Tax collected of Rs.283.77 crores followed by entertainment tax worth of Rs.73.70 crores and other taxes like luxury tax, entry tax and HRBT put together is Rs.128.44 crores.
According to ICRA, the incumbent government as promised has taken slew measures on diverse front’s and welfare schemes and series of policies that has galvanized the investors’ confidence. These measures include trimming bureaucratic hurdles by introducing TS-iPass to boost investments in the State and attracting more foreign investments.
It has painted a rosy picture to Telangana in the Indian markets and financial derivates seem to react to credit rating data about Telangana economy, be it GSDP or Per capita income manufacturing report or external Trade Statistics.
As per the Advance Estimates for 2014-15, the per capita income of the State at current prices increased to Rs 1,03,889 from Rs 95,361 in 2013-14, registering a growth of 8.9 per cent, which is higher than the national per capita income of Rs 88,533.
The per capita income of the State increased from about Rs 24,409 in 2004-05 to Rs 1,03,889 at current prices in 2014-15 The growth in the Per Capita Income, higher than the national average, can also be attributed to the increasing fall in the population numbers in the State. Population decline helps per capita growth Suffice to say that the State is firmly entrenched on the path of progress, what with vital economic indicators showing reversal of deceleration in the economy.
The growth of total population in the State has moderated to 13.58% in the decade 2001 to 2011 from 18.77% in the preceding decade.
The state has emerged as the economically advanced one and applauded industry policy TS-iPASS world wide, for attracting huge the investments and is set to take State to higher levels of financial security.
Many of the MNCs evinced keen interest to invest in Telangana; recently, the ITC has announced Rs 8,000-crore investments in the state of Telangana. Half the said investment would go into expanding Bhadrachalam Paper Board.
About Rs 1,000 crore will be invested by ITC in a second-star hotel in the city's information technology hub and about Rs 800 crore will be spent on a food processing plant in the chief minister's home district of Medak. Apart from the Hitech City hotel project, the company is also looking at building three more hotels in other parts of the city.
Recent visit of Hon’ble Chief Minister to China is yielding results with China's Leo Group of companies is keen to manufacture heavy duty pumps in Telangana with a likely investment of Rs. 1,000 crore.
Celkon and Makeno have signed a memorandum of understanding with the Telangana government in the at Shanghai in China to invest $ 20 million for setting up a LED TV unit in Hyderabad.
Two more Chinese companies in cell phone components and headphones have also come forward to invest in Hyderabad, it means the investments are raining in Telangana, due to futuristic features of Telangana Industrial Policy.
Recognizing, this factor ICRA has awarded ‘A’ ranking to Telangana State. It also highlighted that Telangana has low loan component in the Capital expenditure in comparison with other States. It is estimated that every rupee of capital expenditure in State generates expansion of the order of 2.45 times in the economic output.
It also applauded the State for making huge investments in key programmes has been worthwhile like Mission Kakatiya, Water Grid and in other major and minor Irrigation projects, as these investments lead to creation of assets and boost the economy. Especially the investment in irrigation projects will improve the key sector of agriculture in the State, as the State farming community is facing severe distress with vagaries of monsoon.
After factoring all the above points, the Agency accorded ‘A’ rating to Telangana. With this rating the State’s standing in national and international credit arenas will enhance. It can acquire loans at lesser interest rates. The investor community peruses the ICRA ratings before putting money in the State.
Benefits Telangana gets through ICRA’S ‘A’ category status
A category status is not just a mention or a credit, but there are many advantages Telangana gets through it. Firstly, the state’s priority levels in terms of availing the loans with lower rates of interest, from the national and international agencies increases. This facility cannot be availed by the states, which has the lower rankings, according to ICRA.
ICRA recognized Telangana at the right time
After special package was announced to Andhra Pradesh by the Centre, even the Telangana government sought it for Telangana state too.
but it was declined the ICRA declaring A category status to Telangana, is sure shot a timely decision. It should be seen, how the Telangana state is going to be benefited and how Andhra Pradesh state officials react on such benefits.
G.Rajendera Kumar
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