Evaluate the role of competitive federalism in attracting digital infrastructure investment, with reference to recent rankings of state data centre policies.

Competitive federalism means states compete with each other for investment by offering better policies. S&P Global's Data Centre Policy Attractiveness India (DCPAI) index ranks 19 state policies across 11 states. Telangana comes first, and Maharashtra, Uttar Pradesh and Gujarat are clustered close behind at about 50/100 [1]. This competition has brought in investment, but it rewards subsidies more than results.

Positive role

• Policy clarity: since 2016, states have issued IT, data centre and GCC policies, now compared on four pillars: electricity, land and capital, operational support, and regulatory/EoDB [1].
• Faster clearances: Gujarat leads on electricity and EoDB measures aimed at hyperscalers. Karnataka offers an ESMA cushion that assures uninterrupted operations [1].
• Specialisation: Andhra Pradesh leads on land and capital support, while Odisha and Haryana cover the whole project life cycle [1].
• Results on the ground: installed capacity grew from about 375 MW (2020) to 1.57 GW (August 2026), and is projected to reach nearly 8 GW by 2030 [2].

Limitations

• Promises, not outcomes: the index scores what states offer, not the capacity built or the revenue given up [1].
• Subsidy race: the pillars reward cheaper power and land. The Centre already gives a tax holiday till 2047 to foreign cloud providers that use Indian data centres [3]. When states add their own subsidies on top, the public pays twice for the same project.
• Investment stays concentrated: Mumbai–Navi Mumbai hold over a quarter of live capacity. Chennai is a leading hub even though Tamil Nadu is outside the index's top clusters [1][2]. A city's existing networks and head start matter more than incentives, which weakens balanced regional development.
• Sustainability blind spot: no pillar scores water use or green power [1], even though many data centres are coming up in water-stressed cities.

Verdict and way forward On balance, competitive federalism has driven policy clarity but does not by itself attract investment. To fix this, it should be paired with cooperative federalism:

• Adopt TRAI's Data Centre Incentivization Scheme: the Centre sets baseline incentives and guidelines, and states design their fiscal incentives within them. A national DC Readiness Index would rank state suitability, not just incentives [4].
• Tie power subsidies to renewable energy, and require green data centre certification (IGBC–TEC) [4].

State competition has made India a credible data centre destination, and its success now depends on what states compete over. If states compete on speed, transparency and sustainability rather than on who gives the biggest subsidy, the "Team India" spirit can deliver resilient digital infrastructure that advances SDG 9 and balanced regional growth.