In the wake of crippling protests, the Indian government has agreed to carve out a new state out of the southern state, Andhra Pradesh. There are fears this could give momentum to similar demands in other parts of the country.
Thousands of people who have been demanding a separate state called "Telangana" held victory rallies Thursday, after the federal government agreed to create the new state out of the northern regions of Andhra Pradesh.
Home Minister P. Chidambaram's surprise announcement came after the movement for Telangana" gathered steam in the wake of an 11-day hunger strike by the head of a regional party, K. Chandrasekhara Rao, and violent protests by university students and others.
"The matter did not brook any delay ... I am happy to inform the house that, by and large, normalcy has been restored in Hyderabad and in Andhra Pradesh," he said.
But the government's move is opposed by dozens of lawmakers from Andhra Pradesh, who quit in protest. The lawmakers, who belong both to the ruling Congress Party and opposition parties, say they want the state to remain united.
The demand for Telangana has dragged on, sporadically, for five decades, triggered by complaints that economic development of this drought-prone region has been ignored by the state government. Over the years, more than 300 people have died in violent protests linked to the movement.
The creation of Talengana is likely to take more than a year. But it has already unleashed a battle about the future of Andhra Pradesh state's capital and most famous city, Hyderabad. Hyderabad is a vibrant information-technology hub where firms like Microsoft and Google have established large centers.
Telangana supporters insist they want Hyderabad city to be included in the new state, while Andhra Pradesh want to retain its capital.
Political observers say the creation of Telangana could also give fresh momentum to similar movements for smaller states in other parts of the country, such as West Bengal, Madhya Pradesh and Maharashtra.
India was divided into states, on a linguistic basis, after it gained independence in 1947. Since then several states have been split into smaller ones.
Supporters of smaller states say they are easier to administer. Critics say they fuel regionalism in the multi-cultural and multi-ethnic country.