Oh god, this will be a super-long answer. Also, people from different regions of AP have different views on this.Here is mine:

Short version: I hold an opinion that happens to be very different from most people. The bifurcation of Andhra Pradesh is a very good thing for the people of Andhra and Rayalaseema but could be a bad thing for Telangana.Also, I must mention that I am a native Telugu person, belonging to the Seemandhra region.

I do not know how much you already know about the history of AP, but I will try to give you some background before we jump into the main part of the answer.

History: The map below shows the provinces in south India post independence. The blue part was actually a part of the Madras Presidency during the British rule and the yellow parts which seem to be split by red and blue lines together constituted the Nizam state. Nizam's kingdom was divided into 3 parts as shown and the Telugu speaking part was merged with the Telugu speaking part of the Madras Presidency to form the present day state of Andhra Pradesh. This was followed by the formation of Karnataka, Kerala, Maharashtra, Gujarat, etc. Now why did the whole thing even happen? 



Mahatma Gandhi believed in the creation of linguistic states, while Nehru did not. During the freedom struggle Gandhi promised the people of Seemandhra their own linguistic state once India becomes independant. Remember that the blue part in AP is seemandhra (Rayalaseema+ Coastal Andhra) and the yellow part is Telangana. There was a great freedom fighter and a disciple of Gandhi called Potti Sreeramulu, who felt that the Telugu people in the Madras presidency were not getting their fair share and started a satyagraha-demanding a separate state for the Telugu people. Nehru initially opposed this struggle and Potti Sriramulu died as a result of Nehru's negligence. The Telugu people were enraged and Nehru was eventually forced to create a new Telugu state.

Now, what followed was Nehru's failed decision making and social engineering- which is the root cause of today's problem. Remember how Patel forced the Nizam to merge his kingdom into the Indian Union? After kicking the Nizam out, Nehru did not have a good follow up plan for the backward state of Hyderabad. I vaguely remember a chapter from India After Gandhi, by Ram Chandra Guha where he says Telangana in 1947 had less than 500 people who cleared the 10th standard examinations, while Andhra had a large educated population. So Nehru initially opposed merging Telangana with Andhra thinking it was an unequal marriage.Then there was the Nehru-Patel-Pattabhi Ramaiah commission and the Fazal Ali commission. After a decade or so, he thought he could do some clever social engineering by giving the Telugu speakers of the Nizam's kingdom a new language-based identity along with the people of Seemandhra. This was soon after the first SRC provided him with the pros and cons of the merger. He did not care about the disparities between the people of Telangana and Seemandhra. No one knows how Nehru mades such tough decisions, at times he chose to ignore the recommendations of the SRC and at other times he followed them verbatim.

What were the disparities? Telangana had a feudal history with Islamic rule for over hundreds of years (similar to Delhi), while Seemandhra was ruled by the British and had a long colonial past (similar to Tamil Nadu). However, Nehru did not care. Probably, his biggest fears were that the forcibly annexed state of Hyderabad might remain backward forever or might someday mysteriously leave the Indian Union to join Pakistan (Remember the figure below shows the Pakistan Jinnah wanted, Hyderabad state is called Osmanistan on the map below). This was during the initial days of the Indian Union, which just endured the partition and had several burning issues like Akali Dal's demand for the creation of the Punjabi Suba, the Kashmir issue, etc.


Now the people who love Nehru say all this was not his fault, but it was he who made the final decision in such issues. The next step was to build a capital. People of Seemandhra proposed Kurnool (Andhra's initially proposed vijayawada-guntur but later compromised) as the capital for the new state. However, Nehru convinced them that Hyderabad would be a better location because it had all the infrastructure left behind by the Nizam. The capital issue still remains to be at the core of the state bifurcation issue.


The modern state of Andhra Pradesh was formed and was ruled by successive Congress governments- until N T Rama Rao started the Telugu Desam Party on the basis of Telugu pride and self-rule. Now, there was also a Telangana agitation in the meanwhile, and there was also a separate Jai Andhra movement during Indira Gandhi's prime ministership. However, the Congress party was able to suppress these movements in both the regions- simply because it was the single largest party in the state without a strong opposition.

During all these years- from post-independence to the late 1980's Andhra Pradesh (Telangana in specific) was a socio-economic basket case. Then came Chandra Babu Naidu. He transformed Andhra Pradesh into what it is today: from a basket case into a top 5 state. I won't write much about him because most educated people know his achievements very well and I will leave you with a graph below which speaks volumes about his governance. The spike in Hyderabad (shown in the graph) was during Naidu's rule. This was how Hyderabad was transformed from a backward, lawless city into a modern metropolis.



Now, this is the real contentious issue. People of Seemandhra always felt that it was their investments and human capital that created all the wealth in and around Hyderabad, while Telangana people were free riders. They have always been very upset that many of the coastal cities like Vishakhapatnam, Vijayawada, Tirupati, etc., were neglected because all the investment was flowing into Hyderabad for far too long. Hyderabad by the end of 2005 was like a huge black hole that gobbled up all the foreign direct investment in the state. The Seemandhra people were also worried about the sharing of Krishna and Godavari river waters with Telangana (besides Maharashtra and Karnataka).


Meanwhile, a man called KCR tried to advance his political career by bringing back the separate Telangana movement and starting his own party. KCR's initial argument was that people from Seemandhra have stolen all the fruits of development from the people of Telangana. Later an expert panel called the Sri Krishna commission set up by the central government proved his argument wrong. Here is the link to their report: http://pib.nic.in/archieve/other.... Now that his argument has been proved wrong, KCR picked up another cause: Self-respect of the Telangana people. This is where things get very delicate.

There are three major regional dialects of Telugu- each spoken by the people of Telangana, Coastal Andhra and Rayalaseema. People of Telangana always felt that their dialect was being considered inferior by the speakers of the other dialects. Also, the mass media (like Telugu movies and Television) have always used the Coastal Andhra dialect. So, KCR successfully found a new reason to exploit to his political gain. He claimed that the Telangana culture and dialect were being considered inferior by the people of seemandhra and the only way the Telangana people could get back their self-respect is by demanding a separate state. He started a fast-unto-death- which really scared the hell out of Sonia Gandhi and Chidambaram in 2009 (Remember the Potti Sriramulu incident?). So they caved in and announced in December 2009 that they are willing to form a separate state of Telangana.



Now the story moves to New Delhi. This is the election year and Sonia is worried that the Congress might be decimated in AP during the 2014 elections. Since 2009, the Congress party did not do anything about separate Telangana- until the last month when they finally woke up to the election reality. The state of AP sends a strong contingent (~32) of Congress MPs to Lok Sabha. She is worried that she would lose to KCR in the Telangana region; Jagan Reddy or Chandra Babu Naidu in the Seemandhra region. So she has instead decided to divide and rule the state. She believes that- if they can form the state of Telangana before 2014, they would at least get 17-18 MPs from the newly formed state. However, she is clueless about Seemandhra (refer to the figure below). 



Here comes Mr. Owaisi. Remember this hate-monger from Hyderabad? This guy has collaborated with the Kashmiri Congress leader Ghulam Nabi Azad- to work out a plan to socially re-engineer Andhra Pradesh all over again. They have created a plan that would split the four districts of Rayalaseema into two- one half would be merged with Telangana and the other half would be merged with Seemandhra. They want to rename the new Telangana state as the 'Hyderabad state'- just like the Nizam times! This will be a very dangerous thing for India in the long run. The idea here is to create a huge Muslim minority, which would ensure that the congress party has a secure voter base and political future in the new state. Take a look at the social composition of Andhra Pradesh.



Now why would Telangana lose out and how would Seemandhra gain from the division?

  1. Telangana would fall prey to the vote-bank and socialist economic policies of the Congress party due to the presence of a large number of minorities, and backward classes. Note that the Muslims in Telangana are Urdu speaking, whereas the Muslims from Seemandhra are Telugu speaking and are very well assimilated into the society. Look at the social mix from the 6th bar in the graph above- Telangana would have a huge minority population- which is like Congress party's dream come true. However, the opposite of this would happen in the state of Seemandhra- as it would have less than 5% Muslim population. Refer to the last bar in the graph above.
  2. Compare the percentage of high-castes in Telangana vs Seemandhra, i.e 6th Bar Vs the last bar in the graph above. The high castes from Seemandhra were the entrepreneurial classes who have been creating a lot of wealth over the last few decades (including Hyderabad). Think GMR, GVK, LANCO, Dr. Reddy's, Satyam, several media conglomerates, and the whole of Tollywood, etc. Unfortunately, most people in Telangana can not distinguish between the capitalists who create wealth and the feudalists who steal the wealth. The phobia towards capitalists is so deeply ingrained in the minds of the villagers that it is tough to convince the people about land collection, etc. This mindset is not very prevalent in the people of Coastal Andhra. Here is what Wikipedia has to say about the history of Feudalism in this region: "The Doras ruled the region until the annexation. They held all the land in their fief and everybody use to give their produce, and they use to be given only food barely sufficient for sustenance. The rebellion against feudal lords, known as Vetti Chakiri Udhyamam, from 1946 to 1951 in Telangana region called as Telangana Rebellion illustrates the feudal society in the region.The feudal lords use to reside in a high fortress called as Gadi, for entering it they leave their footwear at the threshold of the Gadi. The madigas and other backward classes should carry their footwear in their hands if they are passing in front of the Gadi or Dora. The Srikrishna committee on Telangana says in its findings that, there is still gross injustice to the land tillers of the region, the villains in this case were landlords of Telangana and not those of other regions." The people of Telangana would lose out on the capitalist classes and their entrepreneurial spirits by mistaking them for such feudal landlords. This will impact their economy over the long run. On the other hand, Seemandhra would have a huge scope for these entrepreneurial classes- close to 31% of the population- to grow and create wealth- primarily because Coastal Andhra does not suffer from such a feudal past.
  3. As many OBC leaders from Telangana have pointed out in the past- the elites in Telangana have always been mostly feudal- but never very entrepreneurial and these are the elites the state of Telangana would be left with. This is indicated in the graph below which shows how inequality in Telangana actually increased over the last decade due to landlessness and feudalism despite the economic boom in that area. Note the steep decrease in inequality in the Andhra region.

  4. Hyderabad would no longer be the cash cow. The first wave of wealth creation in Hyderabad is over and this can be inferred from all the macro-economic indicators. This is probably the worst time to separate this city from its capitalists and entrepreneurs; You are killing the golden goose. The exact opposite is true for Vishakapatnam and Vijayawada. They are yet to begin their first wave of economic growth. Look at the competition in FDI between Coastal Andhra vs Telangana (excluding Hyderabad) from the graph below. Seemandhra is already competing pretty well with Hyderabad in attracting investments. In addition, Hyderabad has been declared as the joint capital for the coming 10 years. Now what does this joint capital even mean? It is just an indirect way of declaring it a Union territory because the constitution does not speak exclusively about joint capitals. Hyderabad would be ruled by a lieutenant governor and the revenues generated by Hyderabad will be shared equally by both the states (via the central government). The law and order will also be in the hands of the central government. There is a great chance that Hyderabad could be made a full-fledged union territory after that. After all, this was what happened to Chandigarh which actually belonged to Punjab and more importantly, did not have a contiguous border with Haryana. Chandigarh was enlarged to include neighboring districts to create a contiguous border with Haryana- to serve as a joint capital of both the states. The same could be done with Hyderabad 10 years from now. So I don't see how the state of Seemandhra would lose out on Hyderabad.

  5. Seemandhra would be a power-surplus state while Telangana would be a power deficit state. Unlike Seemandhra, Telangana consumes a lot more power than it produces- mainly because a lot of power is needed to irrigate the land there.. Seemandhra would have an infrastructure surplus, while Telangana would become a landlocked state by losing out on major ports, coastline, golden quadrilateral and major railway freight corridors (see the figure below). It would also lose its share of revenues from the KG gas basin.

  6. The Telangana movement was very successful because of the involvement of the students. KCR has promised government jobs to all these people. Now the real question is how would he create all those government jobs? On the other hand, a great amount of job creation would happen in Seemandhra because they would need brand new infrastructure and need to build their new capital.
  7. Identity politics and the loss of cultural capital all over again. This is probably something the congress leaders sitting in Delhi would not understand completely.The division is not only being made on the premise of under-development but also on the basis of self-respect and Culture. How would the people of Telangana reconcile with their identity issues once the division is over? Is there a real leader who could make this process easy and rebuild their identity? Would the Telangana people be able to assert their rights over the Telugu language and its 4000 years of literature? Will the Telangana media immediately switch to the Telangana dialect to reflect the new identity? Will there be Telangana movies? Will the new Seemandhra state successfully hijack the Telugu identity once and for all? Will Seemandhra emerge as a strong language based state like Tamil Nadu? These are some tough questions that need answers. They have no concrete answers, but my prediction is that there is a danger of a deep identity crisis for a long time to come unless there is a transformational leader who can make this process easy. After all, 4000 years of identity cannot be divided as easily as a piece of land. This is similar to what happened during India-Pakistan partition ( a bit exaggerated, yes).
  8. Most people from Seemandhra feel the Telugu language did not get its fair share of respect in some parts of Andhra Pradesh, especially Hyderabad- where it had to play second fiddle to languages like Urdu and Hindi (Do not mistake this for anti-Hindi sentiments).The image below shows the vandalized statue of a great Telugu poet, during the Telangana Rashtra Samithi rally in Hyderabad. None of the TRS leaders have ever apologized for this appalling incident. What did Potti Sriramulu die for? What was the Telugu state he had envisioned? The formation of a strong linguistic state like Seemandhra would be a great asset for the Telugu language and its great  literary tradition.Our neighbors in Tamil Nadu have done an admirable job in protecting their linguistic identity and I hope we would be able to do the same in the state of Seemandhra (of course without resorting to all the linguistic politics).

    So it's not just the land, water and money. The Seemandhra region might lose out on water-sharing etc., but there is clearly a lot more at stake here.


Now how would all this affect the nation?

  1. The Pandora's box of state division would be opened once again. There will be demands for Vidharbha, Tulu Nadu, Saurashtra, Bundel Khand, Mithilanchal, Gorkha land, Bodo Land, Purvanchal, Harit Pradesh and many others.
  2. Economic barriers between the newly formed states of Telangana and Seemandhra would impact the market forces and the overall trade in the region.
  3. Communal forces would increase in Hyderabad and the Maoist activity would grow manifold in the forest areas of Telangana. There is no concrete proof for this but this has been the trend in the states like Chattisgarh- which actually shares the Maoist affected forest area with Telangana.
  4. This is clearly a case of the congress party exploiting sub-regionalism in order to reap political benefits from it. Its pure social engineering at work. This is nothing but a mockery of the Indian democracy. This a good example to show that the Nehru-Gandhi family can merge and break any two regions of the country according to their whims and fancies. 

    What is being reported in the national media is a very superficial analysis of what is really happening. They make it look like Telangana is the new state being carved out, while the truth is seemandhra is the new state being formed. They also make it seem like the division is Telangana's gain, while it is actually Seemandhra's. Here is why- Imagine a state where one half of it was like Gujarat and the other half was like Chattisgarh, and assume they were forced to coexist. That was exactly how Andhra Pradesh operated, thanks to Nehru's disastrous social engineering. [ I must also mention that I am not trying to downplay Chattisgarh's progress by comparing it to Gujarat; I am just trying to draw a comparison to indicate how different both the regions are].

    Now that Telangana has voluntarily chosen to break away, the Seemandhra region will be unchained, and the people there will finally be able to unleash their true potential.There will definitely be more Satya Nadella's coming out of Andhra. If things go through as most of us expect, you have another Gujarat in the making. I am not trying to say Telangana will not progress, I equally hope there will be more Phanindra Sama's (Red Bus) from Telangana.However, Seemandhra certainly would have a lot more to gain from this division. I hope both the Telugu speaking states-along with the rest of India, prosper.This is how I look at it; The others might have their own views.

Update: Congratulations to the people of both Telangana and Seemandhra- the divorce is through. Owaisi's 'Rayala-Telangana' or 'Hyderabad state' luckily did not happen; Rayalaseema and Coastal Andhra have chosen to be together and to form the new state. Hyderabad as of now will be a common capital for the coming 10 years.

Sources: All the graphs were taken from the Sri Krishna committee report http://pib.nic.in/archieve/other...

 
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