NEW DELHI (Reuters) ? Activists who want the government to recognise statehood for Telangana shut businesses and disrupted transport during a two-day strike this week, posing another challenge to floundering Prime Minister Manmohan Singh and his Congress party.
The strike in Congress stronghold Andhra Pradesh came after nine MPs from there resigned from parliament over the party's failure to take a stand on the four-decades-old demand, cutting its majority.
Here are some questions and answers about the Telangana crisis, and whether it can hurt the ruling Congress party.
WHAT ARE THE PROTESTS ABOUT?
The demand for a separate state of Telangana, which was merged into Andrha Pradesh in 1956, is half a century old.
A surprise decision by the Congress-led government last year to support a new state came after a Telangana leader's fast sparked off protests in Hyderabad, home to firms including Microsoft and Google.
Supporters of the new Telangana state hailed the decision with firecrackers, but those against splitting Andhra Pradesh also took to the streets in protest. The government backed down, since when the issue has been on the back burner.
At the heart of the dispute is the status of Hyderabad, geographically within the proposed new state, but claimed by both sides. Opponents of Telangana say the city was built into an economic powerhouse by investments from entrepreneurs from other regions of the state.
WHAT IS LIKELY TO HAPPEN?
The central government, beset by corruption scandals and voter anger over high inflation, has continually deferred the issue, saying no decision would be taken in haste and it would try to work out a consensus.
The resignation of national MPs and scores of local assembly lawmakers -- which if accepted would see Congress lose its majority in the state chamber -- has forced the issue, and lead to discussions between New Delhi and the local party.
While the final decision to create states lies with the federal parliament, a resolution approving the formation of Telangana must be cleared by the state legislature, which is sharply divided on the issue.
The Congress party could cajole its state lawmakers to fall in line with the decision, and try to build consensus with other parties.
WHAT DOES IT MEAN FOR BUSINESS?
Some investors are concerned business would not be at the top of the new state's priorities, making Hyderabad a less attractive destination for multinational firms.
They also fret about what sort of labour and tax laws the new state would adopt.
The changed political equations could hit businesses such as real estate and infrastructure firms, many of whom have relied on political ties for their growth.
Telangana, with few resources of its own, would need to open up to investors to remain viable and not depend on federal aid.
The last three states created in India, in 2000, have generally been pro-business. The world's largest steelmaker, ArcelorMittal, is building a plant in Jharkhand, and Uttarakhand's tax breaks have led to many firms starting operations there.
WHAT DOES IT MEAN POLITICALLY?
Since independence in 1947, Indian governments have carefully dealt with demands for new states while ensuring those calls did not escalate to the point at which they threatened the integrity of a nation of 1.2 billion people with hundreds of languages, ethnicities and castes.
Congress' foot-dragging over Telangana has reinforced its appearance as a drifting party unable to make important decisions. Creation of the new state would spark similar calls elsewhere in India.
The Gorkhas, ethnic Nepalis in the Himalayan districts of West Bengal, have restarted their agitation for a separate state, and at least three other movements have been resurrected.
As the government has struggled to contain the fallout, it has been further distracted from its legislative plans.
(Reporting by C.J. Kuncheria and Henry Foy; Editing by Daniel Magnowski)
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