Which Indian states are most investor friendly? Gujarat, Maharashtra and Tamil Nadu have secured the top three positions in NITI Aayog’s investment friendliness index for states and union territories (UTs), according to the report released on Friday.At the other end of the rankings, Lakshadweep emerged as the lowest ranked performer, followed by Ladakh and Andaman and Nicobar Islands.According to PTI, the index evaluates states and union territories on eight key pillars: infrastructure, business climate, resources, government policy, regulatory ease, institutional environment, fiscal health and environmental resilience.The report released by NITI Aayog vice-chairman Ashok Kumar Lahiri has classified the rankings into three groups – large states, hill and north-eastern states, and city states and union territories.
How have the states performed
Gujarat tops the overall ranking with a score of 56.6. Its leading position was supported by strong performance in infrastructure, business climate, financial health, regulatory easing and government policy, while the report identified resources, institutional environment and environmental resilience as areas where the state has room for improvement.According to the report, Gujarat’s high infrastructure score reflects the efficiency of its ports and power sector, supported by competitive power tariffs for industrial and commercial users as well as well-managed transmission and distribution (T&D) losses.Maharashtra ranks second in both the large states and overall national rankings with an overall score of 53.7.According to NITI Aayog, Maharashtra’s ranking is mainly supported by its top performance in the business environment pillar. The state also performed strongly in the resources and financial health categories, while infrastructure and regulatory ease were identified as areas with scope for improvement.Tamil Nadu ranked third 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 environment pillars, while financial health was highlighted as an area requiring improvement.Among the big states, Bihar, Jharkhand and West Bengal remained in the bottom three places. Odisha, Madhya Pradesh and Andhra Pradesh stood fourth, fifth and sixth respectively.In the hill and north-eastern states category, Uttarakhand, Assam and Himachal Pradesh remained in the top three positions.Releasing the report, NITI Aayog vice-chairman Ashok Kumar Lahiri said India’s investment rate is about 25%, which is lower than China’s during a period when its economy was expanding rapidly.“Over the past few years, India has been the fastest growing major economy. Investment plays a major role in economic growth. India needs more investment as it also increases demand.He said, “As we aspire to realize the vision of Developed India @2047, our challenge is not only to sustain high rates of economic growth but also to ensure that such growth is broad-based, flexible and productivity-driven.”Lahiri said achieving this ambition will require a significant acceleration in investment that expands productive capacity, strengthens manufacturing, creates quality jobs and promotes innovation.The index assesses all 28 states and eight union territories, examining both the factors enhancing the state’s attractiveness for investment and the constraints faced by investors.The creation of the Investment Friendliness Index was announced in the Union Budget for 2025-26 with an aim to strengthen competitive and cooperative federalism by encouraging reforms and promoting a more investment-friendly ecosystem in the states.
