The nature of Indian federalism has indeed evolved significantly, transitioning from what was largely characterized as 'cooperative federalism' to an increasingly 'competitive federalism.' Cooperative federalism, prevalent in the initial decades post-independence, emphasized collaboration and interdependence between the Union and State governments. This was necessitated by the need for national integration, planned economic development, and addressing socio-economic disparities. Institutions like the Planning Commission played a central role in resource allocation and policy formulation, often with a top-down approach, fostering a sense of shared responsibility and mutual support.

However, with economic liberalization in the 1990s and subsequent reforms, the dynamics began to shift. Competitive federalism implies that states compete with each other for investment, resources, and market access, and also with the Union government for policy space and financial autonomy. This shift is driven by several factors: the dismantling of the Planning Commission and the establishment of NITI Aayog, which promotes a more bottom-up approach and encourages states to innovate; increased fiscal devolution recommended by Finance Commissions; and the growing importance of states as engines of economic growth. States now actively engage in attracting foreign and domestic investment, improving ease of doing business, and developing their infrastructure, often showcasing their performance relative to other states.

While cooperative federalism aimed at reducing regional disparities through central intervention, competitive federalism encourages states to leverage their strengths and improve governance to attract capital and talent. This can lead to greater efficiency and innovation, but also risks exacerbating regional inequalities if less developed states struggle to compete. The Goods and Services Tax (GST) Council, where states and the Union collectively decide on tax policies, represents a unique blend, demonstrating both cooperative decision-making and underlying competitive pressures among states to optimize their economic environment. This evolution reflects India's maturing economy and political landscape, where states are increasingly asserting their agency and striving for self-reliance.