NITI Aayog’s Investment Friendliness Index has placed Gujarat at the top, with Maharashtra and Tamil Nadu securing the second and third positions respectively, according to the report released on Friday. The index evaluates states and Union Territories on eight key pillars: infrastructure, business climate, resources, government policy, regulatory ease, institutional environment, financial health and environmental resilience, as reported by PTI.
Key Highlights
Gujarat topped the overall rankings with a score of 56.6. Its leading position was supported by strong performances in infrastructure, business climate, financial health, regulatory ease and government policy. The report identified resources, institutional environment and environmental resilience as areas where the state has scope for improvement. According to the report, Gujarat's high infrastructure score reflects the efficiency of its ports and power sector, supported by competitive electricity tariffs for industrial and commercial users as well as well-managed transmission and distribution (T&D) losses.
Maharashtra ranked second both among large states and in the overall national rankings, with an overall score of 53.7. According to NITI Aayog, Maharashtra's ranking is primarily supported by its top performance in the business climate pillar. The state also performed strongly in the resources and financial health categories, while infrastructure and regulatory ease were identified as areas with room for improvement.
Tamil Nadu secured the third position nationally as well as among large states, with an overall score of 53.3. Its ranking was driven by strong performance in the infrastructure and business climate pillars, while financial health was highlighted as an area requiring improvement.
State-wise Performance
The index classifies states into three groups: large states, hilly and northeastern states, and city states and Union Territories. Among large states, Odisha, Madhya Pradesh and Andhra Pradesh were placed fourth, fifth and sixth respectively. In the hilly and northeastern states category, Uttarakhand, Assam and Himachal Pradesh occupied the top three positions.
| Rank | State/UT | Overall Score | Key Strengths | Areas for Improvement |
|---|---|---|---|---|
| 1 | Gujarat | 56.6 | Infrastructure, Business Climate, Financial Health, Regulatory Ease, Government Policy | Resources, Institutional Environment, Environmental Resilience |
| 2 | Maharashtra | 53.7 | Business Climate, Resources, Financial Health | Infrastructure, Regulatory Ease |
| 3 | Tamil Nadu | 53.3 | Infrastructure, Business Climate | Financial Health |
| 4 | Odisha | — | — | — |
| 5 | Madhya Pradesh | — | — | — |
| 6 | Andhra Pradesh | — | — | — |
Note: Scores for ranks 4-6 were not provided in the source.
Bottom Performers
Among large states, Bihar, Jharkhand and West Bengal occupied the bottom three positions. At the national level, Lakshadweep emerged as the lowest-ranked performer, followed by Ladakh and the Andaman & Nicobar Islands.
Official Comments
Releasing the report, NITI Aayog Vice Chairman Ashok Kumar Lahiri said India's investment rate stands at around 25%, lower than China's during the period when its economy was expanding rapidly. He added: "In the last few years, India has been the fastest growing major economy. Investments play a major role in economic growth. India needs more investments as it also boosts demand." Lahiri further noted that achieving the vision of Viksit Bharat @2047 will require a significant acceleration in investments that expand productive capacity, strengthen manufacturing, create quality employment and foster innovation.
Implications for Investors
The index assesses all 28 states and eight Union Territories, examining both the factors that enhance a state's attractiveness for investment and the hurdles faced by investors. The Union Budget for 2025-26 had announced the creation of the Investment Friendliness Index with the objective of strengthening competitive and cooperative federalism by encouraging reforms and promoting a more investment-friendly ecosystem across states. For corporate strategy and M&A advisors, the rankings offer a data-driven benchmark to evaluate state-level business climates when considering expansion or relocation decisions in India.
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