Para-diplomacy, the participation of states/provinces and other NCG’s (non-central governments) in foreign policy to promote their economic, cultural, or political interests, has emerged as a significant trend in India following the economic liberalization of 1991. This policy shift was initiated during the PV Narasimha Rao government with then Finance Minister Manmohan Singh (and later PM from 2004-2014) playing a pivotal role.

The economic reforms of 1991 opened India’s economy to global markets, reduced trade barriers, and encouraged foreign direct investment (FDI).  Among Indian states, the erstwhile Andhra Pradesh -- in 2014 AP was bifurcated into Telangana and the current AP -- and Karnataka stood out as pioneers in para-diplomacy during the 1990s, leveraging their regional strengths to attract global investment, particularly in the information technology (IT) sector.

Why two states took the lead 

Several economic and political factors enabled Andhra Pradesh and Karnataka to pioneer para-diplomacy in India during the late 1990s and early 2000.

Regional leadership played a critical role in this shift. In Andhra Pradesh, Chandrababu Naidu, as a leader of the Telugu Desam Party (TDP) and a key member of the National Democratic Alliance (NDA) coalition from 1998–2004, wielded significant political influence and utilised this effectively to push the economic interests of the state. He aggressively pursued foreign investment to transform Hyderabad (now capital of Telangana) into a global IT hub, branded as “Cyberabad.” Naidu’s proactive approach included a notable 1997 pitch to Microsoft’s then CEO Bill Gates, using a PowerPoint presentation to secure a development centre in Hyderabad. Naidu’s efforts to establish the Indian School of Business (ISB) in Hyderabad further enhanced the state’s appeal to international investors, positioning it as a hub for education and innovation.

Naidu’s political clout allowed him to pursue economic benefits for his state through international engagements, such as participation in the World Economic Forum in Davos.

Similarly, Karnataka’s pro-investor policies and effective outreach that occurred especially during the pioneering chief ministership of the late SM Krishna (1996-2004). The competitive federalism fostered by economic liberalization further incentivized states to differentiate themselves on the global stage. The above points have been highlighted in “Iconisation of Chandrababu: Sharing Sovereignty in India's Federal Market Economy” by Rudolph and Rudolph (Economic and Political Weekly, 2001) and “Icons and Reform Politics in India: The Case of S. M. Krishna” by Narendar Pani for Asian Survey (2006)

Leveraged IT strengths

Both states leveraged their strengths in the IT sector, which was globally oriented and required direct engagement with international companies. Hyderabad and Bengaluru emerged as hubs for IT due to their skilled labour pools, urban infrastructure, and proactive state policies. The global demand for IT services created a unique opportunity for para-diplomacy, as state leaders like Naidu directly courted companies like Microsoft to establish a presence in their regions. Karnataka’s early investment in technical education and infrastructure further positioned Bengaluru as a magnet for FDI, with companies like Infosys and Wipro driving economic growth.

Defence manufacturing new area

In recent years, Andhra Pradesh and Karnataka have extended their para-diplomatic efforts to the aerospace sector, particularly in defence manufacturing. However, challenges in the Light Combat Aircraft (LCA) Tejas program, managed by Hindustan Aeronautics Limited (HAL) in Bengaluru, Karnataka, highlight the complexities of these efforts.

Since 2023, delays in the supply of General Electric (GE) F404-IN20 engines from the U.S. have disrupted the Tejas Mk1A program. Global supply chain issues and U.S. prioritization of its own defence needs have pushed delivery timelines from March 2024 to April 2025, with only two to three jets expected in 2024-25 instead of the promised 16. This delay impacts the Indian Air Force’s operational readiness and challenges Karnataka’s para-diplomatic efforts to position Bengaluru as a global aerospace hub, as showcased during events like the Semiconductor India Summit (2023). Supply chain vulnerabilities could deter international investors, undermining Karnataka’s reputation as a reliable aerospace partner.

Meanwhile, Andhra Pradesh, which contributes components for global platforms like Lockheed Martin’s C-130J, is emerging as a player in the aerospace ecosystem. The state could leverage its para-diplomatic engagements to attract alternative partnerships, potentially gaining a competitive edge over Karnataka.

Collaborative para-diplomacy

Rather than competing, Andhra Pradesh and Karnataka could strengthen their global aerospace standing through collaborative para-diplomacy. By jointly addressing supply chain challenges, such as diversifying engine suppliers or negotiating technology transfers with international partners, the states could enhance their appeal to global investors. Collaborative participation in international forums, such as aerospace trade summits, could also amplify their influence, ensuring that both states benefit from India’s growing defence manufacturing sector.

The post-1991 era of economic liberalization catalyzed a paradigm shift in India's federal structure, empowering states like Andhra Pradesh and Karnataka to engage in para-diplomacy and craft their global economic narratives. Their early success in leveraging IT-led growth demonstrated the transformative potential of subnational diplomacy. Today, as the focus shifts toward strategic sectors like aerospace and defence manufacturing, both states face new challenges that test the resilience and adaptability of their para-diplomatic models. Delays in the Tejas program underscore the risks of global dependency, even as opportunities emerge for Andhra Pradesh to carve a niche in global aerospace value chains. 

Moving forward, the way these states respond, individually or collaboratively, will shape not only their economic futures but also India’s broader strategic footprint. Harnessing the spirit of competitive and cooperative federalism, Andhra Pradesh and Karnataka can lead a new chapter in Indian para-diplomacy that aligns regional capabilities with national ambitions in an increasingly multipolar world.

(Tridivesh Singh Maini is a New Delhi-based policy analyst associated with The OP Jindal Global University, Sonipat, India. Yeshwanth Gangaraju is a Hyderabad-based geopolitical and macro risk consultant. Views expressed are personal. They can be reached at tsmaini@jgu.edu.in and  gangarajuyeshwanth@gmail.com )