Andhra's $15 bn Google deal sparks competition among southern states

In June, when Aruna Urs — cofounder of Mysuru-based craft rum distillery Huli — took to social media to vent his frustration at the Karnataka government’s decision to hike the distillery licence fee by 50 per cent, he didn’t expect a call from across the state border. Within days, officials from the office of Andhra Pradesh’s Information Technology and Real Time Governance minister, Nara Lokesh, son of Chief Minister N Chandrababu Naidu, reached out to him. They promised a “tailor-made excise policy” and a suite of incentives, if he would move his micro-distillery to Andhra. 

Urs chose to stay put. But Andhra’s overture was no one-off. The Naidu government has been relentless in its pursuit of investment, with Lokesh energetically courting companies to relocate from neighbouring states, a strategy that has ruffled feathers in Tamil Nadu, Telangana and Karnataka, and sparked social media spats, most recently between Lokesh and Karnataka’s IT minister, Priyank Kharge. 

Last Wednesday, the Andhra Pradesh government announced that it had approved two major investments by the Raymond group, worth ₹940 crore, in aerospace and automotive manufacturing. The projects, to be set up in Sri Sathya Sai district, are expected to create 5,500 direct jobs, including some relocated from Karnataka, according to state officials. 

Lokesh has also been a key figure in Andhra’s efforts to bag the $15 billion data and AI centre deal from Google, for which multiple southern states had fiercely competed. After sealing the deal for Visakhapatnam, Lokesh took a jibe at Karnataka. “They say Andhra food is spicy. (It) seems some of our investments are too. Some neighbours are already feeling the burn,” he posted on X. 

Karnataka’s Priyank Kharge, son of Congress President Mallikarjun Kharge, fired back. “Everyone enjoys a bit of spice in their food,” he quipped, before adding pointedly: “Just as nutritionists recommend a balanced diet, economists too advocate a balanced budget.” He accused the Andhra government of reckless borrowing, claiming its liabilities had soared to nearly ₹10 trillion. “In just one year, they have borrowed ₹1.61 trillion, and the revenue deficit-to-GSDP ratio has worsened from 2.65 per cent to 3.61 per cent.” And then came the kicker: “Whatever said and done, we will always be: ‘Neighbour’s envy and owner’s pride,’” Kharge said, invoking the slogan of a 1990s television ad. 

Kharge argued that Andhra’s offer of ₹22,000 crore in subsidies and freebies to Google, including tax breaks and utilities waivers, was unsustainable and would create limited jobs. The optics of Andhra landing the deal had ripple effects in Tamil Nadu, too. “Despite Google CEO Sundar Pichai being a Tamil, Google has gone to Andhra Pradesh, not Tamil Nadu,” said Opposition AIADMK leader and former minister P Thangamani in the Assembly, criticising the ruling DMK for “failing to attract” the tech giant, even as the state celebrated a proposed ₹15,000 crore Foxconn investment. 

For states, such political one-upmanship has become the backdrop to a high-stakes competition for every big-ticket investment that comes along. Ahead of the Maharashtra Assembly polls last year, Uddhav Thackeray’s Shiv Sena (UBT) and allies flayed the Eknath Shinde-led BJP government for losing major projects, including the Vedanta-Foxconn semiconductor plant and the Tata-Airbus C-295 aircraft facility, to Gujarat. 

Further north, Uttar Pradesh, Madhya Pradesh and Rajasthan have all tried to sharpen their investor pitch in recent years. But the southern turf war remains the fiercest. The most public example came in 2023, when both Telangana and Karnataka claimed victory in landing a Foxconn plant supplying Apple. Similar bidding wars have surrounded the Vedanta-Foxconn semiconductor fab, Amazon’s data investments, and Google’s cloud projects. 

“Not every day is ours,” said a veteran industry insider who helps firms navigate state policies. “Competition is good, but it should be healthy. Compete on service, on ease of doing business. But when it comes to incentives, remember — it’s public money. There should be more responsibility,” he said, requesting anonymity. 

A day before the Google deal was inked, Lokesh told Business Standard that his government was simply practising what PM Narendra Modi calls “competitive federalism”. “When states compete, India wins,” he said. “If someone else is complacent, that doesn’t mean we sit back and watch. We are here to grab every opportunity possible, and we’re putting our best foot forward.”

Andhra, Lokesh insisted, offers the infrastructure and ecosystem investors need — just as his father did in the 1990s, when, as he put it, there was “healthy competition” between Naidu and Karnataka’s then chief minister, S M Krishna. “That’s how both Karnataka and the erstwhile Andhra flourished,” he said. 

But as the Google project in Visakhapatnam reignites debate over how far states should go to woo investment, questions loom large. How much can governments afford to give away from the public exchequer to secure marquee deals? Industry voices are appealing to the Centre to bring out a national policy, setting limits. Last year, NITI Aayog initiated measures to ensure that states target potential investors depending on the comparative advantages they have in various sectors.