Paper: GS – III, Subject: Indian Economy, Topic: Growth and Development, Issue: Inter-State Rivalry Fueling India’s Growth.
Context:
Since India’s economic liberalisation in 1991, the power to attract investment has gradually shifted from New Delhi to the States.
Key Highlights:
- Today, Indian States engage directly with multinational corporations, competing through improved business environments, skilled labor, and transparent policies.
From Centralised Patronage to Competitive Federalism:
- Pre-1991, industrial investment was centrally controlled, driven by political motives rather than market forces.
- States competed by lobbying central politicians rather than courting investors directly.
- liberalisation reforms aimed to unleash state-level competition to improve infrastructure and governance.
Maturing Investment Competition Among States:
- States like Andhra Pradesh, Tamil Nadu, and Karnataka actively compete to attract marquee investments such as Google’s AI data centre.
- Competitive pitches now involve data-driven presentations, reliable policy frameworks, and skilled workforces rather than mere subsidies.
- Other examples: Gujarat winning semiconductor projects over Maharashtra; Tamil Nadu and Telangana’s contest over EV manufacturing hubs.
Positive Outcomes of Inter-State Rivalry in India:
- States become magnets for capital and ideas, serving as multiple points of entry for investors.
- Diverse strengths: Andhra Pradesh’s ease of doing business, Tamil Nadu’s skilled workforce, Gujarat’s infrastructure, Jharkhand’s mineral resources, and Uttar Pradesh’s scale and potential.
- Healthy rivalry encourages imitation of successful reforms, like single-window clearances and EV policies, causing policy diffusion.
Implications for India’s Global Positioning:
India’s shift from central control to competing States represents a major structural change. Guided by innovation and good governance, inter-State rivalry drives nation-building and collective prosperity when a State wins, India wins.
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