Not everyone in Andhra Pradesh is pleased about the proposed new state
Indian Home Secretary GK Pillai has said that the process for creating the new state of Telangana will go ahead and its capital will be Hyderabad.
Mr Pillai was speaking as protests against plans to carve out the new state from the southern state of Andhra Pradesh led to sporadic violence.
He said that he expected the current agitation soon to fade away.
The move to form Telangana state has plunged Andhra Pradesh into crisis, with over 100 lawmakers resigning.
Investors fear the protests will hurt Hyderabad, an IT hub of southern India and home to firms like Microsoft, Google and Dell.
A strike is being held in 12 districts in protest against the move
Correspondents say that no decision has formally been taken as to which state Hyderabad will belong to - so Mr Pillai's comments during a two-day visit to Indian-administered Kashmir - are important.
A strike is being held in 12 districts of Andhra Pradesh and protesters have attacked public transport vehicles in some places.
Thousands of people marched in the state on Friday, some supporting the decision for a separate state, others vowing to fight against its formation. Businesses were shut and public transport halted.
The state has long been divided between the more prosperous coastal area and the less developed inland Telangana region.
The move to create the new state is also fuelling demands for other new states across India.
Two parties in the eastern West Bengal state have said they will begin campaigning again for separate states.
The Gorkha Janmukti Morcha (GJM) is demanding a separate state and fairer treatment for Darjeeling's Nepali-speaking Gorkha community.
And the Kamtapur Peoples Party (KPP) is demanding a separate state for the local Koch-Rajbongshi people.
The GJM has announced a four day strike in the Darjeeling region beginning Monday.
The KPP has said it will set up road blocks on highways in northern Bengal which connect India's seven north-eastern states to the mainland.
"We will join the Gorkhas in the movement for a separate state. It is now or never," said KPP chief Atul Roy.
A spokesman for the Bodo tribespeople in the north-eastern state of Assam has also demanded the creation of a separate state.
"We welcome the creation of Telangana and we hope the Indian government will take necessary steps to create a separate Bodoland state without any further delay," said Sangsuma Khungur Bwismutiary, the independent member of parliament from Kokrajhar, the headquarters of the Bodoland Territorial Council.
The BBC's Soutik Biswas in Delhi says the announcement of a Telangana state has come as a shot in the arm for political parties and groups in the country demanding new states.
Reports say that the federal government is already sitting on proposals for nine new states in the country.
Telangana region is spread over 10 northern districts of Andhra Pradesh.
INDIA'S NEWEST STATE
Population of 35 million
Formed from 10 districts of Andhra Pradesh, including city of Hyderabad
Landlocked, predominantly agricultural area
One of the most under-developed regions in India
Culmination of 50-year campaign
More than 400 people died in 1969 crackdown
The demand for separate state status for the underdeveloped and drought-prone area dates back 50 years.
More than 400 people died in violence over the demand for a Telangana state in 1969.
Campaigners say Telangana's economic development has been neglected in favour of the richer and more powerful Andhra region - and that a new state is the only solution.
The last three new states in India were formed in 2000: Chhattisgarh was created out of eastern Madhya Pradesh; Uttarakhand was created out of the hilly areas of northern Uttar Pradesh, and Jharkhand was carved from Bihar's southern districts.
India currently has 28 states.