NITI Aayog's Investment Friendliness Index highlights India's top investment destinations while offering key lessons for Northeast India as it seeks greater private investment and industrial growth.
Imphal, July 17: As India pursues its goal of becoming a developed nation by 2047, the competition among states to attract private investment is becoming increasingly decisive. The newly released Investment Friendliness Index (IFI) by NITI Aayog provides a comprehensive assessment of how states and Union Territories perform in creating an environment conducive to investment, offering fresh insights into both the strengths and shortcomings of India's investment ecosystem.
While the report identifies Gujarat, Maharashtra and Tamil Nadu as the country's leading investment destinations, it also carries important implications for the Northeast. Although none of the eight northeastern states are part of the "Large States" category assessed in the report, the findings underline the policy reforms, infrastructure improvements and institutional capacity that the region will need to strengthen as it seeks greater domestic and foreign investment.
The Index evaluates states across multiple pillars, including business climate, regulatory ease, government policy, institutional quality, infrastructure, environmental resilience, financial health and resource availability. Together, these factors determine how effectively a state can attract, facilitate and retain investments.
According to NITI Aayog, India's economic growth since the liberalisation reforms of 1991 has been driven largely by investment-led expansion. As the Centre continues to introduce macroeconomic reforms, state governments are increasingly becoming the primary interface for investors.
The report notes that a handful of states continue to dominate India's investment landscape. Maharashtra, Karnataka, Gujarat, Delhi and Tamil Nadu together account for nearly 85 per cent of the country's total Foreign Direct Investment (FDI) inflows, illustrating the widening gap between established industrial centres and emerging investment destinations.
For the Northeast, where several state governments have been actively promoting sectors such as logistics, tourism, food processing, renewable energy and electronics manufacturing, the report offers valuable lessons on improving competitiveness.
Gujarat secured the highest overall position in the Investment Friendliness Index with a score of 56.6, reflecting its strong industrial ecosystem, business-friendly regulatory framework and extensive infrastructure network.
The report credits Gujarat's consistent policy environment, efficient logistics and industrial infrastructure for sustaining investor confidence. However, it also identifies areas requiring further improvement, including specialised workforce development in pharmaceuticals, electronics and automobile manufacturing, along with upgrades to urban municipal roads that support industrial mobility.
Maharashtra followed closely with a score of 53.7, benefiting from its diversified economy, industrial parks, higher education institutions and transport connectivity. The report nevertheless points to relatively complex construction approval processes, high industrial electricity tariffs and policy uncertainties as areas requiring attention.
Tamil Nadu ranked third nationally with 53.3, supported by its engineering talent base, institutional capacity and reliable transport infrastructure. At the same time, the report identifies challenges including water availability, congestion at Chennai Port and fiscal pressures arising from the state's debt burden.
The report highlights that several resource-rich states possess strong natural advantages but continue to encounter institutional and regulatory bottlenecks.
Odisha, ranked fifth nationally, benefits from sound financial management, abundant mineral resources and relatively efficient business registration processes. However, investors cited gaps in commercial dispute resolution and transport connectivity in parts of northern Odisha.
Madhya Pradesh also performed well, drawing strength from its mineral wealth and policy stability. Investors, however, highlighted concerns relating to road maintenance, air connectivity and police availability.
Both Andhra Pradesh and Karnataka shared an identical score of 48.7, although their investment profiles differ considerably.
Karnataka remains one of India's largest recipients of FDI and continues to dominate the country's technology sector. Nevertheless, the report points to infrastructure gaps outside the information technology sector, including insufficient cold storage facilities that affect agricultural supply chains and shortages of skilled blue-collar workers.
Among the states positioned below the national leaders, Telangana continues to benefit from its widely recognised TS-iPASS single-window clearance system, which has often been cited as one of India's more efficient investment facilitation mechanisms.
Despite these strengths, investors reportedly continue to encounter procedural challenges involving approvals for new enterprises, particularly among first-time micro, small and medium enterprises (MSMEs).
Haryana's industrial ecosystem also received favourable assessments, particularly for logistics infrastructure and warehousing capacity. However, the report notes concerns regarding skilled workforce availability and the need for stronger flood management infrastructure.
India's most populous state, Uttar Pradesh, continues to expand its industrial profile through expressway development and innovation ecosystems. Yet the report observes that environmental sustainability remains a challenge, particularly in cities facing persistent air quality concerns.
The report suggests that eastern India continues to face structural constraints in attracting private investment despite possessing considerable natural resources and strategic advantages.
West Bengal ranked 24th nationally with a score of 41.3, with the report highlighting concerns over business climate, financial health and land acquisition processes. While the state has established digital investment facilitation platforms, investors reportedly continue to view land availability as a significant challenge.
Jharkhand, also scoring 41.3, possesses one of India's richest mineral bases but attracted only marginal FDI during FY2024. According to the report, inadequate road infrastructure outside industrial clusters and uneven digital connectivity continue to affect investor perceptions.
Bihar ranked last among the large states with a score of 41.2. Despite relatively extensive transport infrastructure and above-average spending on education, the report identifies weak industrial ecosystems, limited access to finance and the absence of well-developed industrial parks as major constraints on investment-led growth.
Although the northeastern states are assessed separately under NITI Aayog's methodology, the findings from the larger states offer a roadmap for the region's own investment ambitions.
Over the past few years, northeastern governments have sought to position the region as an emerging destination for investment through improved connectivity, industrial incentives, logistics infrastructure and the Act East Policy. Projects including new highways, railway expansion, multimodal logistics hubs and enhanced digital connectivity are expected to improve market access for businesses across the region.
States such as Assam have actively promoted semiconductor manufacturing, electronics, food processing and green energy investments, while Meghalaya has focused on tourism, hospitality, renewable energy and sustainable mining practices. Tripura, Mizoram, Nagaland and Arunachal Pradesh have also introduced sector-specific industrial policies aimed at attracting investment in agro-processing, bamboo, healthcare, education and information technology.
However, the report's broader findings indicate that infrastructure alone may not be sufficient.
Institutional efficiency, predictable regulations, faster approvals, skilled manpower, transparent governance and ease of doing business remain equally important factors influencing investment decisions. Improving these areas could enable northeastern states to compete more effectively as investors increasingly diversify beyond traditional industrial hubs.
The Investment Friendliness Index reinforces the idea that attracting investment requires a combination of physical infrastructure, efficient governance and policy consistency rather than relying solely on natural resources or fiscal incentives.
For the Northeast, which continues to receive substantial infrastructure investments from the Centre, the next phase of economic development may depend on strengthening regulatory institutions, expanding industrial ecosystems, improving logistics and creating a larger pool of skilled workers capable of supporting emerging industries.
As India works towards the goal of becoming a developed economy by 2047, the experience of the country's leading investment destinations suggests that sustained policy reforms, institutional credibility and long-term planning will remain central to attracting both domestic and international capital.
For the northeastern region, the challenge is not merely to improve rankings but to translate ongoing infrastructure expansion into durable industrial growth, employment generation and private sector confidence.
