- NITI Aayog launched the Investment Friendliness Index (IFI) to assess the investment ecosystem across states and Union Territories, encouraging competitive federalism and supporting the vision of Viksit Bharat @2047.
- The Index evaluates states across eight themes including infrastructure, business climate, regulatory ease, governance, and environmental resilience, with Gujarat, Maharashtra, Tamil Nadu, Goa, and Odisha emerging as the top performers.
- IFI aims to drive inclusive economic growth by promoting investment, job creation, entrepreneurship, and policy reforms while helping states improve their investment climate through healthy competition and knowledge sharing.
On 17 July 2026, NITI Aayog launched the ‘Investment Friendliness Index (IFI)’, a key measure to consolidate India’s federal structure. Instituted on directions of the Prime Minister, Narendra Modi, at the 9th Governing Council meeting of NITI Aayog in July 2024, this Index was also announced by the Union Budget 2025-26 and aims at establishing a standard of measurement to facilitate the states and Union Territories’ effort towards improvement of the investment ecosystem, by collecting data across different areas of Investment Climate in states.
Driven by the vision of Viksit Bharat @2047, this Index analyses 28 states and 8 Union Territories across eight themes of Infrastructure, Business Climate, Resources, Government policy, Regulatory ease, Institutional arrangement, financial health, and environment resilience using 84 indicators, drawn from secondary data sources along with primary investor perception survey data.
Top Performers and Peer Group Insights
Top performers are Gujarat, Maharashtra, Tamil Nadu, Goa, and Odisha (scores above 50). Among the Large States category, Gujarat topped the ranking, followed by Maharashtra and Tamil Nadu, whereas, among the Hilly and North Eastern states category, Uttarakhand emerged at the top. Conversely, in the case of the City States and Union Territories category, Goa ranked at the top by adopting a peer-group framework that takes states’ geographic locations and their economic muscle into account to allow for equitable competition and promote competitive and cooperative federalism by states in adopting best practices from each other.
Social Angle: Investments as Drivers of Human Development
At the societal level, the IFI looks at equality and job creation, as well as disparities between states and regions. India’s growth story hasn’t always been inclusive. With the mechanism of competitive federalism using instruments such as the IFI, investment can be directed towards job creation, skilling, and poverty reduction in underdeveloped states. “To achieve Viksit Bharat, we need to scale up much more rapidly investments to increase the capacity of the economy, manufacture things, create jobs and innovation,” said Ashok Kumar Lahiri, vice chairman of NITI Aayog, adding that the multiplier benefit of manufacturing is in terms of jobs, logistics, skill, quality of life, etc.
According to former Vice Chairman Suman Bery, the environment in which firms operate is shaped by policies and institutions created by the state. Hence, it directly affects the promotion of entrepreneurship, industrial growth, and job creation. Former Member Dr. Arvind Virmani: Bringing our dreams closer to economic reality, and in operational terms, for everyone to be a beneficiary of growth.This is well supported by the literature on federalism throughout the world and supports the benefits of competitive federalism in government and greater economic benefits or developmental payoffs from inter-state competition for investment.
Comparative Study in the Indian Context
India’s post-liberalisation journey has shown different paths taken by different states. States such as Gujarat and Maharashtra continue to attract capital from manufacturing and services because they have good infrastructure and have provided policy stability. They have therefore achieved a higher per capita income and a greater proportion of their population in urban employment.
Tamil Nadu’s large manufacturing and export sectors, skilled human resources, and leadership in renewables provide significant advantages for inclusive development. Other North-eastern states and the hilly states, constrained by their infrastructure and connectivity levels, perform poorly within these peer groups. The IFI’s emphasis on Environmental Resilience and Resources encourages locally appropriate, sustainable economic development, which is a prerequisite for socially sustainable outcomes in these fragile environments. Many of these national initiatives, such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code, help create an environment conducive to such outcomes. But success hinges on the state-level implementation of policy.
The Index highlights issues related to ease of regulation and institutional capacity, where policy reforms can break bureaucratic barriers that may have disproportionate impacts on small businesses and entrepreneurs from marginal communities. Economically, the level of investment is directly linked to employment creation, whether directly in the manufacturing sector or indirectly through supply chain linkages, which will be the major employment generators for rural migrants and women workers. In social terms, this will lead to greater mobility, reduced regional inequalities, and increased investment in human capital through increased funding for education and skills training. According to the analysts, in an economy characterized by growing interstate disparities, it will be essential to initiate targeted policy reforms that would encourage laggard states to take remedial action through competitive reforms.
At the same time, the process should also involve cooperative approaches to knowledge sharing and capacity building, since, as noted by another analyst, such interplay will significantly raise the profile of the states in the future of the Indian economy.
Challenges and the Road Ahead
Though IFI has the power to catalyse reform, hurdles remain. The investors surveyed as part of the IFI point out several ground-level impediments – land acquisition issues, logistics efficiency, policy predictability, to name a few. The environmental factor, too, needs to be carefully calibrated to growth and environmental concerns to prevent negative social spillover on disadvantaged communities.
NITI Aayog considers the IFI a work-in-progress measurement tool, rather than a periodical ranking, to ensure long-term engagement and credibility.
The individual state profile analyses not only present quantitative rankings but also provide actionable recommendations and qualitative observations.
Conclusion: Towards Inclusive Viksit Bharat
IFI by NITI Aayog marks the beginning of an era of mature federalism where Indian states emerge as proactive and involved partners in building a new India, by setting out to recognize and reward performance on a scale and setting new investment objectives on terms that ensure that our growth leads not only to higher GDP, but to inclusive development, employment, and poverty reduction, and in redeveloping our regions. India’s race to become a developed economy by 2047 will have to rely on effective collaboration among stakeholders, be it policymakers, investors, or the general public. IFI is thus not only the document, but an initiative for the states to ensure their success with all Indians.
Clear Cut Research Desk
New Delhi, UPDATED: July 21, 2026 09:00 IST
Written By: Yatharth Pathak
