Despite the Ministry of External Affairs’ (MEA) constitutional monopoly over international relations, state governments have evolved into formidable geopolitical actors in their own right. This shift has forced a reimagining of how New Delhi engages with the world. Today, Indian states operate along a critical dual spectrum —they frequently act as uncompromising diplomatic veto players capable of stalling transboundary treaties, while simultaneously serving as the primary engines driving India's global economic integration.
G20 promotional posters in India. Credit: Photo by Gayatri Malhotra/ Unsplash.
The Veto Players: When States Take Over Foreign Policy
Border states frequently leverage their geopolitical location and cultural ties to compel New Delhi’s hand on the international stage.
Flowing from the Himalayas through Sikkim and West Bengal before entering Bangladesh, the Teesta River is a critical transboundary water resource. The protracted dispute over it stands as a textbook example of domestic electoral politics, while acting as a roadblock to national diplomatic strategy.
In September 2011, the central government, led by Prime Minister Manmohan Singh, was prepared to sign a landmark water-sharing agreement allocating 37.5% of the Teesta's dry season water to Bangladesh. However, West Bengal Chief Minister Mamata Banerjee vehemently opposed the deal, arguing that releasing more water would severely impact farmers in North Bengal. Fearing intense political backlash at home, Ms. Banerjee abruptly pulled out of the prime ministerial delegation to Dhaka, effectively vetoing the treaty. This state-level veto continues to stall New Delhi's broader "Neighborhood First" outreach to Dhaka.
The crippling effect of West Bengal's stance on the Teesta treaty stands in sharp contrast to the historic 2015 ‘India-Bangladesh Land Boundary Agreement’ (LBA). The complex exchange of enclaves was successfully ratified only because New Delhi engaged in meticulous political maneuvering to secure Ms. Banerjee's explicit state-level buy-in. The juxtaposition of these two events proves that while Indian states can unilaterally hijack foreign policy to protect domestic electoral interests, they are equally capable of acting as crucial facilitators when their political concerns are accommodated.
While West Bengal's influence stems from resource sharing, Tamil Nadu’s para-diplomatic power is fueled by deep transnational ethnic ties. The plight of Sri Lankan Tamils has long been a potent emotional and electoral issue in Tamil Nadu, transforming the state’s political parties into powerful arbiters of India’s policy towards Colombo. Both dominant Dravidian parties, the DMK and the AIADMK, have historically weaponized their domestic rivalry to constrain New Delhi's diplomatic flexibility. This ethnic veto reached a crescendo in the aftermath of the Sri Lankan Civil War in 2009 —driven by intense public outrage in Tamil Nadu over reported war crimes, state leaders repeatedly pressured the Central government to penalize Colombo on international forums.
During the United Nations Human Rights Council (UNHRC) sessions in 2012 and 2013, when traditionally India refrained from voting on country-specific UN resolutions to uphold principles of “non-interference”, DMK’s threatening withdrawal over its critical coalition support from the ruling UPA-2 government forced New Delhi to capitulate and vote against Sri Lanka to satisfy domestic political demands.
This domestic "ethnic veto" created a severe strategic dilemma for Indian statecraft. By forcing New Delhi to adopt an adversarial posture toward Sri Lanka, local politics in Tamil Nadu frequently undermined India's long-term Indian Ocean security strategy. The resulting diplomatic friction repeatedly pushed Colombo closer to Beijing, allowing China to expand its maritime footprint in Sri Lanka through massive infrastructure projects —the Hambantota Port now.
Flowing from the Himalayas through Sikkim and West Bengal before entering Bangladesh, the Teesta River is a critical transboundary water resource. The protracted dispute over it stands as a textbook example of domestic electoral politics, while acting as a roadblock to national diplomatic strategy.
In September 2011, the central government, led by Prime Minister Manmohan Singh, was prepared to sign a landmark water-sharing agreement allocating 37.5% of the Teesta's dry season water to Bangladesh. However, West Bengal Chief Minister Mamata Banerjee vehemently opposed the deal, arguing that releasing more water would severely impact farmers in North Bengal. Fearing intense political backlash at home, Ms. Banerjee abruptly pulled out of the prime ministerial delegation to Dhaka, effectively vetoing the treaty. This state-level veto continues to stall New Delhi's broader "Neighborhood First" outreach to Dhaka.
The crippling effect of West Bengal's stance on the Teesta treaty stands in sharp contrast to the historic 2015 ‘India-Bangladesh Land Boundary Agreement’ (LBA). The complex exchange of enclaves was successfully ratified only because New Delhi engaged in meticulous political maneuvering to secure Ms. Banerjee's explicit state-level buy-in. The juxtaposition of these two events proves that while Indian states can unilaterally hijack foreign policy to protect domestic electoral interests, they are equally capable of acting as crucial facilitators when their political concerns are accommodated.
While West Bengal's influence stems from resource sharing, Tamil Nadu’s para-diplomatic power is fueled by deep transnational ethnic ties. The plight of Sri Lankan Tamils has long been a potent emotional and electoral issue in Tamil Nadu, transforming the state’s political parties into powerful arbiters of India’s policy towards Colombo. Both dominant Dravidian parties, the DMK and the AIADMK, have historically weaponized their domestic rivalry to constrain New Delhi's diplomatic flexibility. This ethnic veto reached a crescendo in the aftermath of the Sri Lankan Civil War in 2009 —driven by intense public outrage in Tamil Nadu over reported war crimes, state leaders repeatedly pressured the Central government to penalize Colombo on international forums.
During the United Nations Human Rights Council (UNHRC) sessions in 2012 and 2013, when traditionally India refrained from voting on country-specific UN resolutions to uphold principles of “non-interference”, DMK’s threatening withdrawal over its critical coalition support from the ruling UPA-2 government forced New Delhi to capitulate and vote against Sri Lanka to satisfy domestic political demands.
This domestic "ethnic veto" created a severe strategic dilemma for Indian statecraft. By forcing New Delhi to adopt an adversarial posture toward Sri Lanka, local politics in Tamil Nadu frequently undermined India's long-term Indian Ocean security strategy. The resulting diplomatic friction repeatedly pushed Colombo closer to Beijing, allowing China to expand its maritime footprint in Sri Lanka through massive infrastructure projects —the Hambantota Port now.
Beyond the UNHRC, the ongoing dispute over Katchatheevu island acts as a permanent domestic anchor on India’s maritime strategy. Ceded to Sri Lanka in 1974 by Prime Minister Indira Gandhi through a bilateral maritime agreement, this small, uninhabited island in the Palk Strait remains a highly volatile electoral issue in Tamil Nadu. A subsequent 1976 agreement restricted Indian fishermen from operating in the surrounding waters, leading to the frequent arrest and detention of Tamil fishermen by the Sri Lankan Navy. State political leaders have continually challenged the constitutionality of the 1974 cession in the Supreme Court and routinely demand the island's retrieval. This unrelenting domestic pressure forces New Delhi into a ‘reactive’, often ‘combative diplomatic posture’.
By severely limiting India's strategic flexibility and mandating constant friction over maritime fishing rights, this local political veto inadvertently provides Beijing with greater maneuvering space. As India is forced to play hardball to satisfy domestic constituencies, it risks alienating Colombo, allowing China to further expand its strategic and naval footprint in the Indian Ocean.
By severely limiting India's strategic flexibility and mandating constant friction over maritime fishing rights, this local political veto inadvertently provides Beijing with greater maneuvering space. As India is forced to play hardball to satisfy domestic constituencies, it risks alienating Colombo, allowing China to further expand its strategic and naval footprint in the Indian Ocean.
Punjab presents a unique model of para-diplomacy driven by a highly mobilized transnational diaspora and physical proximity to a hostile neighbor. A defining example of this sub-national influence is the ‘Kartarpur Corridor’. A visa-free crossing, inaugurated in 2019, connects Dera Baba Nanak in India's Punjab to the revered Gurdwara Darbar Sahib in Pakistan, located just 4.7 kilometers across the border. The corridor materialized largely due to the sustained cultural and religious advocacy of the Sikh community, functioning as a rare “bridge of peace” that temporarily bypassed the traditional, hard-power hostility between New Delhi and Islamabad.
Beyond immediate border dynamics, Punjab’s massive diaspora in Canada, the United Kingdom, and the United States heavily dictates India's relations with the West. Diaspora activism, ranging from fierce lobbying over domestic Indian agricultural policies to the resurgence of separatist rhetoric, increasingly blurs the line between state level politics and international relations. Consequently, New Delhi frequently finds its diplomatic bandwidth consumed by managing the political spillover from Punjab's transnational networks, forcing complex and sometimes confrontational recalibrations in its strategic partnerships with Western capitals.
Beyond immediate border dynamics, Punjab’s massive diaspora in Canada, the United Kingdom, and the United States heavily dictates India's relations with the West. Diaspora activism, ranging from fierce lobbying over domestic Indian agricultural policies to the resurgence of separatist rhetoric, increasingly blurs the line between state level politics and international relations. Consequently, New Delhi frequently finds its diplomatic bandwidth consumed by managing the political spillover from Punjab's transnational networks, forcing complex and sometimes confrontational recalibrations in its strategic partnerships with Western capitals.
The Growth Engines: Economic Paradiplomacy
The rise of subnational diplomacy is not entirely defined by border state friction. The most transformative aspect of state level engagement is overwhelmingly constructive —the pursuit of global capital and technology. This shift was catalyzed by the 1991 economic liberalization, which fundamentally decentralized India's economic growth and empowered states to act as direct stakeholders in the global market.
Prior to 1991, Indian states were largely passive administrative units waiting for the central government to mediate economic opportunities. The dismantling of the "License Raj" and the integration of India into the global economy forced a massive structural shift. As central funding shrank and competitive federalism took root, state governments realized they could no longer rely exclusively on New Delhi. To secure infrastructure investments and create jobs, they began aggressively courting Foreign Direct Investment (FDI) on their own, setting up specialized economic zones, offering tailored tax incentives, and sending direct trade missions abroad.
This aggressive pursuit of FDI was institutionalized in 2003 with the creation of the "Vibrant Gujarat" model. Under the leadership of then Chief Minister Narendra Modi, Gujarat pioneered the state led global investment summit, transforming a regional event into a massive para-diplomatic forum. Instead of merely pitching to foreign companies, Gujarat began partnering directly with sovereign nations, fundamentally changing how Indian states interact with the world. State leaders began acting as de facto diplomats, bypassing traditional bureaucratic bottlenecks to host foreign delegations and forge long-term economic partnerships. Today, almost every major Indian state replicates this model to signal their readiness for global capital.
While early paradiplomacy focused heavily on basic manufacturing and infrastructure, Southern Indian states are currently leading a sophisticated wave of “tech diplomacy”. States like Karnataka, Tamil Nadu, and Telangana have rapidly evolved beyond the traditional MEA channels to negotiate directly with global tech giants and foreign governments. By capitalizing on their deep engineering talent pools and established IT ecosystems, these states frequently forge direct MoUs with counterparts in Japan, South Korea, and the United States. This localized diplomacy is directly responsible for securing multi-billion dollar investments in next-generation sectors —semiconductor fabrication, (EV) manufacturing, and niche electronics. In the race to establish India as a global tech hub, these states operate not just as regional hubs, but as independent engines driving India's broader macroeconomic and geopolitical ambitions.
Prior to 1991, Indian states were largely passive administrative units waiting for the central government to mediate economic opportunities. The dismantling of the "License Raj" and the integration of India into the global economy forced a massive structural shift. As central funding shrank and competitive federalism took root, state governments realized they could no longer rely exclusively on New Delhi. To secure infrastructure investments and create jobs, they began aggressively courting Foreign Direct Investment (FDI) on their own, setting up specialized economic zones, offering tailored tax incentives, and sending direct trade missions abroad.
This aggressive pursuit of FDI was institutionalized in 2003 with the creation of the "Vibrant Gujarat" model. Under the leadership of then Chief Minister Narendra Modi, Gujarat pioneered the state led global investment summit, transforming a regional event into a massive para-diplomatic forum. Instead of merely pitching to foreign companies, Gujarat began partnering directly with sovereign nations, fundamentally changing how Indian states interact with the world. State leaders began acting as de facto diplomats, bypassing traditional bureaucratic bottlenecks to host foreign delegations and forge long-term economic partnerships. Today, almost every major Indian state replicates this model to signal their readiness for global capital.
While early paradiplomacy focused heavily on basic manufacturing and infrastructure, Southern Indian states are currently leading a sophisticated wave of “tech diplomacy”. States like Karnataka, Tamil Nadu, and Telangana have rapidly evolved beyond the traditional MEA channels to negotiate directly with global tech giants and foreign governments. By capitalizing on their deep engineering talent pools and established IT ecosystems, these states frequently forge direct MoUs with counterparts in Japan, South Korea, and the United States. This localized diplomacy is directly responsible for securing multi-billion dollar investments in next-generation sectors —semiconductor fabrication, (EV) manufacturing, and niche electronics. In the race to establish India as a global tech hub, these states operate not just as regional hubs, but as independent engines driving India's broader macroeconomic and geopolitical ambitions.
The Institutional Response
As Indian states increasingly bypass traditional bureaucratic channels, the central government had to adapt. Rather than attempting to suppress this subnational assertiveness, New Delhi has moved toward institutionalizing it. The goal is to harness the states' economic para-diplomacy as a tool of national growth while ensuring their actions do not fracture India's unified diplomatic posture.
The most concrete bureaucratic response to the rise of state-level diplomacy occurred in October 2014, when the MEA established a dedicated "States Division". The States Division was designed to act as a nodal point between the MEA, foreign embassies, and regional governments. It facilitates the international outreach of states, helping them arrange global investment summits, formalize sister-city agreements, and manage the travel of regional leaders. More importantly, it serves as a central “clearinghouse” to ensure that state-level MoUs and foreign engagements align with New Delhi's broader strategic imperatives.
Beyond bureaucratic coordination, the central government has actively weaponized state-level rivalry as a tool of economic statecraft. This strategy is driven by the doctrine of “cooperative” and “competitive federalism”. Rather than negotiating all foreign direct investment centrally, New Delhi encourages states to compete fiercely against one another for global capital. The central government facilitates this by releasing annual ‘Ease of Doing Business’ rankings for Indian states, judging them on parameters like “land acquisition”, “labor flexibility”, and “regulatory transparency”.
The most concrete bureaucratic response to the rise of state-level diplomacy occurred in October 2014, when the MEA established a dedicated "States Division". The States Division was designed to act as a nodal point between the MEA, foreign embassies, and regional governments. It facilitates the international outreach of states, helping them arrange global investment summits, formalize sister-city agreements, and manage the travel of regional leaders. More importantly, it serves as a central “clearinghouse” to ensure that state-level MoUs and foreign engagements align with New Delhi's broader strategic imperatives.
Beyond bureaucratic coordination, the central government has actively weaponized state-level rivalry as a tool of economic statecraft. This strategy is driven by the doctrine of “cooperative” and “competitive federalism”. Rather than negotiating all foreign direct investment centrally, New Delhi encourages states to compete fiercely against one another for global capital. The central government facilitates this by releasing annual ‘Ease of Doing Business’ rankings for Indian states, judging them on parameters like “land acquisition”, “labor flexibility”, and “regulatory transparency”.
Strategic Vulnerabilities and Future Outlook
While economic para-diplomacy drives growth, the decentralized and sometimes uncoordinated international engagement of Indian states introduces severe strategic vulnerabilities —primarily being “institutional”. While the MEA established a "States Division" to facilitate coordination, the broader federal architecture remains unequipped for the realities of subnational diplomacy. Crucially, the Inter-State Council, the constitutional body explicitly designed to manage center-state relations, lacks a formal, permanent foreign affairs consultative committee.
This governance gap means there is no dedicated, bipartisan forum for states and the center to align their international ambitions with national security priorities before conflicts arise. Consequently, when state and central interests inevitably clash, whether over transboundary water treaties in West Bengal or maritime borders in Tamil Nadu, New Delhi is forced into “ad-hoc crisis management” rather than “proactive strategic planning”.
The aggressive, competitive pursuit of Foreign Direct Investment by states also creates regulatory blind spots that geopolitical adversaries can exploit. As state governments fiercely compete to offer relaxed regulatory oversight and fast-tracked land acquisition to attract global capital, they risk inviting investments that compromise national security.
A prime example is the threat of Chinese economic statecraft. In 2020, the central government issued Press Note 3, mandating strict central approval for any FDI originating from countries sharing a land border with India to prevent opportunistic takeovers of Indian firms. Driven by job creation, states frequently court investments the center views as strategic threats. For example, Maharashtra and Telangana eagerly pursued billion-dollar deals with Chinese EV giants Great Wall Motors and BYD, which New Delhi swiftly vetoed over data surveillance risks. Similarly, cash-strapped state electricity boards procuring cheap Chinese hardware have exposed regional power grids to state-sponsored cyber-intrusions like the ‘RedEcho’ attacks, inadvertently handing foreign adversaries potential “kill switches” to critical national infrastructure.
A prime example is the threat of Chinese economic statecraft. In 2020, the central government issued Press Note 3, mandating strict central approval for any FDI originating from countries sharing a land border with India to prevent opportunistic takeovers of Indian firms. Driven by job creation, states frequently court investments the center views as strategic threats. For example, Maharashtra and Telangana eagerly pursued billion-dollar deals with Chinese EV giants Great Wall Motors and BYD, which New Delhi swiftly vetoed over data surveillance risks. Similarly, cash-strapped state electricity boards procuring cheap Chinese hardware have exposed regional power grids to state-sponsored cyber-intrusions like the ‘RedEcho’ attacks, inadvertently handing foreign adversaries potential “kill switches” to critical national infrastructure.
In essence, State governments are no longer just administrative subordinates, they are formidable geopolitical actors capable of wielding diplomatic vetoes and driving India’s global economic integration. Ultimately, Indian foreign policy is no longer forged exclusively at the center, it is negotiated, contested, and propelled by its states.
About the Author: Nayanika Karan
Nayanika Karan is a policy researcher who holds a B.A. (Hons) from Miranda House, University of Delhi, with specialized skills in climate risk assessment and geospatial intelligence.