Articles on 13 November 2025

Inter-State Rivalry That is Fuelling India’s Growth

Context

• The establishment of Google’s largest Artificial Intelligence data centre in Andhra Pradesh marked a defining moment in India’s evolving economic landscape.
• The celebrations in Visakhapatnam and the envy in neighbouring States such as Tamil Nadu and Karnataka reflected more than regional rivalry, they revealed the emergence of a new kind of federalism.
• Across India, Chief Ministers are no longer queuing in Delhi for patronage; they are now in boardrooms and global summits, competing for investments through performance, efficiency, and policy innovation.
• This shift from central dependence to State-level competition represents a profound transformation in India’s governance and growth model.

From Central Patronage to State Initiative and The Emergence of Competitive Federalism

• From Central Patronage to State Initiative

  • For decades after Independence, New Delhi controlled the economic destiny of the nation.
  • The system of licences, permits, and quotas ensured that decisions about what industries could operate, and where, were made by central bureaucrats. States competed not for entrepreneurs but for the goodwill of Ministers in the capital.
  • The 1991 liberalisation reforms fundamentally altered this equation.
  • The dismantling of industrial licensing and the opening of the economy to global trade shifted power from the Centre to the States.
  • Economic decision-making became more decentralised, and States began to realise that attracting investment depended on infrastructure, governance, and stability, not political connections.
  • This shift laid the groundwork for competitive federalism, where success arises from competence rather than patronage.

• The Emergence of Competitive Federalism

  • Andhra Pradesh, Tamil Nadu, and Karnataka now compete vigorously for global technology projects such as those from Google, Micron, and Foxconn.
  • Gujarat’s victory in securing semiconductor investments and Telangana’s push for electric vehicle manufacturing show how regional economies have become strategic players in global value chains.
  • This is no longer a competition for subsidies but a contest for credibility and reliability.
  • States attract investors by offering policy predictability, efficient administration, and a skilled workforce.
  • The race for development has thus turned into a race for good governance, where performance is the true measure of power.

Lessons from Global Federations

• This evolution is not unique to India. In the United States, over two hundred cities competed to host Amazon’s second headquarters, offering infrastructure, incentives, and workforce plans.
• Though some saw it as a subsidy race, it led many cities to upgrade governance and urban planning.
• In Germany, Bavaria’s transformation into an innovation hub, home to BMW, Siemens, and clusters of Mittelstand firms, demonstrates how dynamic State-level policy can reshape an economy.
• Australia and Canada too have witnessed similar trends, with regional governments competing for mining, clean energy, and education investments.

The Centre’s Role and the Risks of Rivalry

• The Central government has supported this transformation by introducing national rankings on ease of doing business, startup promotion, and export readiness.
• These benchmarks have pushed States to innovate and to refine their investment strategies.
• Investors now see India not as a single entity, but as a federation of opportunities, each with its own strengths, Andhra Pradesh’s business climate, Tamil Nadu’s skilled workforce, Gujarat’s infrastructure, Punjab’s entrepreneurial energy, and Jharkhand’s natural resources.
• Yet, competition must be managed carefully. There is a danger of a race to the bottom, where States offer excessive subsidies or indiscriminate land concessions to attract industries.
• The smarter path lies in competing through competence, not concessions. Sustainable competition depends on transparency, fiscal prudence, and institutional strength.

A New Federal Compact

• India’s new economic order is defined by a striking shift, Chief Ministers now pitch to CEOs, not Cabinet Ministers.
• The transformation from a permission-based economy to a persuasion-based one reflects a change in mindset as much as in policy. States no longer rely on central handouts; they campaign for investments with confidence, data, and strategy.
• Every success achieved by a State, whether it is Andhra Pradesh securing a tech data centre, Gujarat winning a semiconductor plant, or Uttar Pradesh expanding its electronics manufacturing base, strengthens national supply chains and skill ecosystems.
• As multinational firms diversify beyond China, they find in India not a single destination but a federation of competitive, complementary regions. In this way, India competes globally through its States.

Conclusion

• The rivalry between Andhra Pradesh, Tamil Nadu, and Karnataka over Google’s data centre signifies a maturing of India’s federal spirit.
• What once appeared as political one-upmanship now represents economic dynamism and policy innovation.
• The era of central patronage has given way to an age of collaborative competition, where each State strives to outdo others through better governance, smarter policies, and stronger institutions.
• India’s transformation from control to competition, from licences to leadership, embodies the essence of modern federalism.

Inter-State Rivalry That is Fuelling India’s Growth FAQs

Q1. What does Google’s data centre in Andhra Pradesh symbolize in India’s economic context?
Ans. It symbolizes the rise of competitive federalism, where Indian States actively compete to attract global investment.

Q2. How did the 1991 economic reforms change the balance of power in India’s economy?
Ans. The 1991 reforms shifted economic power from the Centre to the States, enabling them to attract industries through their own policies and initiatives.

Q3. What distinguishes healthy competition among States from a “race to the bottom”?
Ans. Healthy competition focuses on governance, reliability, and competence, while a race to the bottom relies on unsustainable subsidies and giveaways.

Q4. How does India’s experience compare with other federal countries?
Ans. Like the U.S., Germany, Australia, and Canada, India’s States now compete to attract investment, driving innovation and efficiency across the federation.

Q5. What is the broader impact when a State secures major investment?
Ans. Every State’s success strengthens national supply chains and skills, meaning each victory contributes to India’s overall growth and global competitiveness.

Source: The Hindu

Fine-Tune the AI Labelling Regulations Framework

Why in news?

• A viral AI-generated video of Finance Minister Nirmala Sitharaman endorsing a fake investment scheme led to a ₹66 lakh fraud, highlighting the dangers of deepfake technology.
• In response, the government has proposed amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, requiring large social media platforms to label AI-generated or synthetic media.
• While these changes are an important step toward combating misinformation, experts warn that effective enforcement will be challenging and will need collaboration among platforms, regulators, and civil society.
• This article highlights the need to fine-tune India’s proposed AI-labelling regulations amid rising cases of AI-generated deepfakes and fraud.
• It explains the limitations of current labelling rules, the importance of graded compliance for platforms and creators, and the urgent need for stronger verification systems and independent oversight to protect users from harmful synthetic media.

Challenges in Defining and Labelling Synthetic Media

• Synthetic media, created or altered using algorithms or editing tools, is difficult to regulate because not all such content is harmful.
• With reports suggesting that over half of online content is now AI-generated, the government’s push for labelling aims to ensure accountability.
• However, the draft rules’ requirement — labels covering 10% of visual space or 10% of audio duration — raises practical issues.
• It is unclear how these rules apply to mixed media (real visuals with AI-generated audio), and short disclaimers may be as ineffective as fine print in ads. Conversely, long disclaimers in long videos may overwhelm viewers.
• Further, watermarks from AI companies are unreliable, as tools already exist to remove them.
• This shows that current solutions are not foolproof, and strict, one-size-fits-all labelling may not be technology-neutral, future-proof, or even meaningful.
• A more workable approach would be a tiered labelling system distinguishing between fully AI-generated, AI-assisted, and AI-altered content, ensuring clarity without overburdening viewers or creators.

Why Graded Compliance and Creator Transparency Are Essential

• The draft rules require major platforms like Facebook, Instagram, YouTube, and X to detect and label synthetic media.
• However, experts argue that creators themselves must also be included, as many use AI for storytelling, digital avatars, and hyper-realistic content that viewers often cannot distinguish from real footage.
• A graded compliance system is suggested, where creators with large followings must disclose their use of AI, just as major platforms do. Smaller creators can be encouraged to self-label voluntarily.
• This approach recognises that high-influence creators shape public opinion and therefore have a responsibility to be transparent.
• It also helps them maintain audience trust and remain aligned with future regulations.

Why Verification of Synthetic Media Needs Stronger Support

• Current System Relies Too Much on User Labelling

  • Under the draft rules, large platforms must ask users to self-label synthetic content and then verify these disclosures.
  • But AI-generated media is growing far faster than platforms’ ability to check it, making effective oversight difficult.

• Existing Detection Standards Are Limited

  • Most platforms follow C2PA standards to trace the origins of digital content. However:
    • Labelling is not consistently enforced,
    • AI-generated content is increasingly hard to detect,
    • Verification tools remain imperfect and easily bypassed.
  • Platforms will ultimately need third-party detection tools, whose accuracy depends entirely on the quality of their training datasets.

• Platforms Are Failing to Label AI Content

  • An audit by Indicator revealed major gaps:
    • Only 30% of 516 test posts across major platforms were correctly flagged.
    • Google and Meta failed to label content created by their own AI tools.
    • TikTok only labelled in-app AI creations.
    • Pinterest, the best performer, labelled just 55%
  • This shows that current systems are far from reliable.

• Need for Independent Verifiers and Human Oversight

  • Since automated tools cannot catch everything, platforms must work with independent fact-checkers and auditors who can apply human judgment, especially for harmful or fraudulent deepfakes.
  • These external verifiers can fill gaps in detection, help platforms become more resilient, and better protect users from deception.

Conclusion

• As synthetic media grows, clear labelling will help users identify manipulated content without guessing.
• With nuanced rules, India’s IT framework can ensure people receive credible, authentic information.

Fine-Tune the AI Labelling Regulations Framework FAQs

Q1. Why did India propose new AI-labelling rules?

Ans. A viral AI-generated video of the Finance Minister caused a ₹66 lakh fraud, highlighting deepfake dangers and prompting the government to strengthen digital authenticity regulations.

Q2. What makes defining synthetic media challenging?

Ans. Synthetic media includes AI-created, AI-assisted, and algorithmically altered content. Not all forms are harmful, making a one-size-fits-all labelling rule ineffective.

Q3. Why is graded compliance important for creators?

Ans. Creators with large influence significantly shape public opinion. Mandatory AI disclosures enhance transparency, build trust, and align creators with evolving platform regulations.

Q4. What are the limitations of current detection systems?

Ans. Platforms rely on inconsistent C2PA standards, weak verification tools, and user self-labeling. An audit showed only 30% of AI posts were properly flagged.

Q5. Why are independent verifiers necessary?

Ans. Automated tools miss many deepfakes. Independent auditors bring human judgment, spotting harmful synthetic content more reliably and strengthening platform resilience against deception.

Source: TH