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India's states harm themselves with wild policy swings

Investors cannot trust that governments will honor contracts

| India

There was concerning news from the south of India in mid-November. The state of Andhra Pradesh has canceled a Singapore-backed project to develop its new capital, Amaravati, into a world-class financial hub. The plan of the previous chief minister, it has fallen foul to his successor from a rival party.

Similarly, Chief Minister Jagan Mohan Reddy has been threatening to revoke solar and wind power purchase agreements if producers refuse to renegotiate rates for energy projects. These agreements were established by his predecessor and guaranteed high prices for the producers. Forcing prices lower will create problems for banks that financed these projects.

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