VZCZCXRO8385
RR RUEHBI RUEHCI
DE RUEHCG #0398 1581142
ZNR UUUUU ZZH
R 071142Z JUN 07
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 0985
INFO RUEHNE/AMEMBASSY NEW DELHI 2574
RUEHCG/AMCONSUL CHENNAI
RUEHCI/AMCONSUL KOLKATA 0794
RUEHBI/AMCONSUL MUMBAI 5063
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASH DC

UNCLAS CHENNAI 000398 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EINT EINV PGOV IN
 
SUBJECT: ANDHRA PRADESH SOFTWARE EXPORTS SOAR; NAIDU FOCUSES ON 
POVERTY 
 
REF: 06 CHENNAI 2607 
 
¶1.  (SBU) SUMMARY:  Andhra Pradesh's information technology sector 
continues to boom, with software exports from the state increasing 
by almost 50% last year.  Despite the growth in IT, politicians of 
all stripes, including the state's influential former Chief Minister 
Chandrababu Naidu, are worried that the state's growth is not 
sufficiently inclusive.  Naidu says he is working on a plan to 
tackle the problem, but many are skeptical that his new thinking is 
only a cynical response to his 2004 electoral defeat.  END SUMMARY. 
 
 
------------------------- 
SOFTWARE EXPORTS SOAR 
------------------------- 
 
 ¶2. (U) Software exports from the south Indian state of Andhra 
Pradesh hit a new high in 2006, increasing 48% over the previous 
year according to media reports.  The state is now in fourth place 
and has a 14% share of India's overall software exports.  The sector 
produced 35,000 new jobs in 2006.  During a recent visit to 
Hyderabad, Andhra Pradesh's political capital and economic hub, 
political, business, and media contacts we met all expressed 
optimism about continued growth in the technology sector.  U.S. 
investment in Hyderabad continues to increase:  Google recently 
announced an expansion of its Hyderabad presence which will increase 
its workforce from 1,000 to 4,000; Dupont signed a Memorandum of 
Understanding for a $1 billion biotechnology research and 
development facility; and California Governor Arnold Schwarzenegger 
will lead a trade delegation to the city in November 2007. 
 
--------------------------------------------- 
POLITICOS WORRY GROWTH NOT INCLUSIVE ENOUGH 
--------------------------------------------- 
 
 ¶3. (SBU) Despite strong growth in the IT sector, Andhra Pradesh's 
politicians worry that the benefits of economic growth are not 
reaching enough of the state's citizens.  Chandrababu Naidu, former 
Chief Minister and head of the Telugu Desam Party, and the man 
widely credited with engineering Hyderabad's IT boom, told Embassy 
New Delhi PolCouns during a May 23 meeting that his biggest concern 
today is that the common man is not reaping the fruits of economic 
growth.  He said that he is focused on finding a vision for 
distributing the benefits of growth to India's poor, especially in 
rural areas.  Members of Naidu's party subsequently told post that 
he has just begun his examination of the problem. 
 
 ¶4.  (SBU) Andhra Pradesh's current Chief Minister Y.S.R. Reddy, 
whose Congress party swept into the majority in 2004 on a wave of 
discontent with his predecessor Naidu's perceived lack of attention 
to the rural poor, has committed his government to addressing the 
concerns of Andhra Pradesh's rural poor while maintaining the 
momentum of the state's IT sector.  Even the Chief Minister's 
international travel demonstrates this balancing act:  in his recent 
trip to the United States he addressed the World Agricultural Forum 
and later made a swing through Silicon Valley.  Suresh Reddy, the 
Congress-party Speaker of the Andhra Pradesh Legislature, told post 
that his party was looking to "bridge the gap" between rural poverty 
and urban economic development by improving rural infrastructure. 
 
 ¶4. (SBU) COMMENT: For Naidu to change his focus to rural poverty 
shows just how far the political terrain in Andhra Pradesh has 
shifted.  Naidu's party is widely believed to have lost the 2004 
election because many in the electorate, especially in the 
agricultural sector, felt left out of the IT-fueled economic growth 
that Naidu championed.  A media contact and a representative of 
Hyderabad's large but disproportionately poor Muslim community both 
scoffed at Naidu's new tune, seeing it as a cynical response to his 
election defeat.  But Naidu is a formidable thinker who successfully 
realized the at-the-time audacious vision of putting Hyderabad on 
the map along with Bangalore as an IT hub.  If Naidu is sincerely 
looking to find a way to equitably distribute the benefits of 
growth, he could help provide leadership in answering one of India's 
most vexing questions.  END COMMENT. 
 
 ¶5. (U) The message was coordinated with Embassy New Delhi. 
 
 
HOPPER