Is the competition among neighboring states for attracting more investments and funds is within the spirit of competitive federalism? Discuss while taking examples of Telangana and Andhra Pradesh.

Yes. The competitive federalism is rapidly taking root as states move swiftly to showcase themselves as ideal investment destinations. When states or regions compete with each other to promote economic growth and development by reforming their governance and policies, its overall result is the growth and development of India.
Telangana and Andhra Pradesh have shown exemplary performance highlighting importance of competitive federalism. For example, Telangana was able to draw international giants like Uber, IKEA, Dreamworks, Amazon, Apple and so on. Andhra Pradesh is also not far behind. It has around 51% investment growth against 79% of Telangana. Both states have competed in almost all crucial aspects of governance. Few examples are as follows:

  • Towards single desk clearance policies, Telangana launched TS-iPass and T-HUB while Andhra Pradesh launched First IT.
  • To digitize, encourage digital transactions and setting up e-purses Andhra Pradesh launched “AP purse” while Telangana launched E-Wallet.”

There are numerous other examples. During late 1990s, Andhra Pradesh and Karnataka competed each other to attract IT industry. Today, we have both Bengaluru and Hyderabad has IT cities.  Both states improved their positions in business-friendly and liberalized approval policies to set up industries and it has helped both states attract more investment proposals. This successful model of competitive federalism must be emulated with due modification in other states. NITI Aayog can play a very important role by spreading the best practices.

Question for UPSC Mains:
Is the competition among neighboring states for attracting more investments and funds is within the spirit of competitive federalism? Discuss while taking examples of Telangana and Andhra Pradesh.

Published: November 19, 2017 | Modified:June 27, 2019

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