1. Introduction

The Index provides a structured, evidence-based evaluation of the policy, regulatory, institutional, financial, and infrastructure conditions that influence investment decisions across the country. By comparing the performance of States and UTs on common parameters, the Index aims to promote transparency, accountability, and continuous improvement in the investment ecosystem.

The report recognises that while the Central Government provides the overall macroeconomic and policy framework, it is the States that play a decisive role in facilitating investments through efficient governance, quality infrastructure, ease of doing business, skilled human resources, and stable policy environments. Strong State-level investment ecosystems are essential for attracting both domestic and foreign investments, boosting industrial growth, generating employment, and strengthening India’s global competitiveness.

The Investment Friendliness Index also serves as a practical tool for policymakers and investors by highlighting strengths, identifying gaps, and encouraging the adoption of best practices across States and Union Territories.

2. Origin and Intent

India has experienced sustained economic growth over the last three decades and is working towards the vision of Viksit Bharat @2047. Achieving this goal requires significantly higher levels of investment, particularly from the private sector, which is expected to drive industrialisation, innovation, exports, infrastructure development, and job creation.

Although several reforms introduced by the Central Government—including improvements in taxation, digital governance, and business regulations—have strengthened the national investment climate, investors often make their final decisions based on conditions at the State level. Factors such as land availability, infrastructure, ease of obtaining approvals, quality of institutions, policy stability, and financial management vary across States and directly affect investment decisions.

Recognising this, NITI Aayog developed the Investment Friendliness Index as a data-driven benchmarking framework to evaluate the investment readiness of all States and Union Territories. The Index assesses performance across eight key pillars:

• Infrastructure 
• Business Climate 
• Resources 
• Government Policy 
• Regulatory Ease 
• Institutional Environment 
• Financial Health 
• Environmental Sustainability and Resilience 

By measuring performance across these pillars, the Index encourages States to improve governance, attract investments, and foster healthy competition while promoting cooperative federalism.

3. Key Amendments

The Investment Friendliness Index is the first comprehensive national framework that evaluates the overall business and investment environment across all 28 States and 8 Union Territories. Rather than focusing only on ease of doing business, the Index considers a broad range of factors that determine long-term investment potential.

To ensure fair comparison, NITI Aayog has grouped States and Union Territories into three categories:

• Large States 
• Hilly and North-Eastern States 
• City States and Union Territories 

Based on their overall score out of 100, States are classified into four performance categories:

1. Top Performers – Score above 50 
2. Frontrunners – Score between 45 and 50 
3. Emerging Performers – Score between 40 and 45 
4. Aspiring States – Score below 40 

The Index adopts a balanced assessment methodology by combining quantitative indicators with qualitative evaluation. It measures not only infrastructure and regulatory efficiency but also institutional capacity, fiscal management, environmental resilience, and investor confidence. This broader approach provides a more realistic picture of a State’s ability to attract and sustain investments over the long term.

4. Impact

The Investment Friendliness Index has been developed by NITI Aayog in collaboration with CRISIL as its knowledge partner. The assessment is based on official government data collected from various Ministries and Departments, complemented by an investor perception survey involving approximately 1,850 investors from different sectors. This combination of objective data and industry feedback makes the Index more comprehensive and credible.

The Index is expected to create healthy competition among States by encouraging them to improve infrastructure, simplify regulations, strengthen institutions, and maintain sound fiscal management. States can identify areas where reforms are needed and learn from the successful practices adopted by higher-ranked States.

For governments, the Index acts as a policy tool to identify weaknesses in governance, infrastructure, regulatory systems, and financial management. It also enables better allocation of public resources by highlighting areas requiring greater investment and administrative reforms.

For investors, the Index offers a reliable reference for comparing investment destinations based on transparent and standardised criteria. It provides valuable insights into regulatory stability, infrastructure quality, institutional efficiency, and fiscal health, helping businesses make informed investment decisions.

Overall, the IFI is expected to strengthen cooperative federalism, improve India’s ease of doing business, attract greater domestic and foreign investment, and support sustainable economic growth.

5. Conclusion

The inaugural Investment Friendliness Index identifies five States as Top Performers, reflecting their strong investment ecosystems and policy frameworks:

1. Gujarat ranked first with a score of 56.6, supported by world-class port infrastructure, efficient logistics, a competitive power sector, and a strong industrial base. 
2. Maharashtra secured second position with a score of 53.7, driven by its leadership in attracting private equity, venture capital, manufacturing, and services investments. 
3. Tamil Nadu ranked third with a score of 53.3, recognised for its strong export performance, industrial ecosystem, and high conversion of investment Memoranda of Understanding (MoUs) into actual projects. 
4. Goa emerged as the leading performer among City States and Union Territories, scoring 53.1 due to its favourable business environment and governance standards. 
5. Odisha ranked among the top performers with a score of 52.4, benefiting from abundant natural resources, industrial development, and continued infrastructure expansion. 

The launch of the Investment Friendliness Index marks an important step in strengthening India’s investment ecosystem through objective benchmarking and evidence-based policymaking. The Index highlights regional strengths and investment gaps, enabling States to improve governance, infrastructure, and fiscal discipline. By encouraging competition, promoting best practices, and increasing transparency, the IFI is expected to enhance investor confidence, attract higher domestic and foreign investments, and contribute significantly to India’s journey towards becoming a developed economy by 2047.