Decoding the Investment Friendliness Index
On July 17, 2026, the policy think tank NITI Aayog released its first-ever "Investment Friendliness Index" (IFI), a comprehensive report designed to assess how well India's states and Union Territories are creating an environment conducive to investment.
This initiative was born from a directive by the Prime Minister in 2024 to create a charter for attracting investments and was later announced in the Union Budget 2025-26. The index is not just a ranking but a tool meant to foster healthy competition and encourage states to learn from each other's successes. It evaluates all 28 states and eight UTs on 84 different indicators grouped under eight main pillars: Infrastructure, Business Climate, Resources, Government Policy, Regulatory Ease, Institutional Environment, Financial Health, and Environmental Resilience. These pillars cover the entire lifecycle of an investment, from initial policy considerations to the ease of daily operations.
The Top Performers: Gujarat Leads the Way
Among the 17 major states analyzed, Gujarat has emerged as the clear frontrunner, securing the top rank with a score of 56.6 out of 100. The state's strong performance is attributed to its excellence in infrastructure, business climate, regulatory ease, and stable government policy. Specifically, the report highlights Gujarat's efficient ports, reliable power supply with industrial tariffs nearly 29% below the national average, and a robust single-window clearance system for investors. Following closely are Maharashtra and Tamil Nadu, with scores of 53.7 and 53.3, respectively. Maharashtra's strength lies in its superior business climate, attracting significant private equity and venture capital, while Tamil Nadu scored high on infrastructure and business climate pillars. Goa and Odisha also featured among the top five overall performers, demonstrating that strong investment climates are developing across different regions.
The Challengers and Areas for Improvement
While some states have excelled, the index also reveals significant disparities and areas needing urgent attention. Among the large states, Bihar, Jharkhand, and West Bengal were ranked at the bottom, indicating substantial challenges in creating an investor-friendly ecosystem. The report also points out a wider trend: no single state or UT managed to score 60 out of 100, suggesting that even the top performers have room to grow. For instance, while Gujarat leads overall, it has scope for improvement in areas like resources and environmental resilience. Maharashtra, despite its strong business climate, was advised to improve its infrastructure and regulatory ease. This regional divergence is starkly visible in foreign direct investment (FDI) flows, where the top five states attract 85% of total FDI, while the entire northeastern region receives less than 1%.
Why This Ranking Matters for India's Future
The Investment Friendliness Index is more than an academic exercise; it's a critical component of India’s ambition to become a developed nation by 2047. As NITI Aayog Vice Chairman Ashok Lahiri noted, higher investment is crucial for boosting economic growth, and this index serves as a guide for states to identify their strengths and weaknesses. A better investment climate at the state level directly translates to more jobs, enhanced manufacturing, increased exports, and overall economic prosperity. By making this data public, NITI Aayog aims to spur a new wave of reforms driven by competitive federalism, where states compete to offer the best business environment. For businesses, the index provides a data-backed guide for making location-specific investment decisions, moving beyond anecdotal evidence to compare states on concrete parameters. The ultimate goal is to create a virtuous cycle where state-level improvements collectively enhance India's position as a top global investment destination.
