States are expected to play a much bigger role in drawing private investment and supporting India's long-term economic growth. To support this effort, NITI Aayog has introduced the Investment Friendliness Index, describing it as a tool to help states improve their investment climate rather than simply rank their performance.
The report says India's goal of becoming a Viksit Bharat by 2047 will depend on consistently increasing productive investments. It adds that state governments will have to strengthen areas such as ease of doing business, infrastructure, policy stability and efficient regulations to attract both domestic and international investors.
According to NITI Aayog, the Investment Friendliness Index has been created to assess how prepared different states are to attract investments. It examines the factors that make a state appealing to investors while also identifying the challenges that may discourage new investments.
The report highlights that investments have contributed to more than half of India's economic growth since the early 1990s. It adds that achieving faster long-term growth will require stronger investment-driven development. Since investors choose project locations based on state-specific conditions, factors such as quality infrastructure, clear regulations and effective institutions become crucial.
The index is also designed to help states compare their performance, identify areas that need improvement and learn from successful practices adopted elsewhere. NITI Aayog says it aims to encourage healthy competition among states while strengthening cooperative federalism and allowing governments to track reform progress over time.
The report notes that states offering investor-friendly systems—such as single-window approvals, dedicated grievance redressal mechanisms and plug-and-play industrial infrastructure—have seen higher investment commitments and quicker project implementation. This shows that efficient governance is just as important as industrial capacity in attracting investors.
It further points out that while government spending and household investments have supported capital formation after the pandemic, private corporate investment is expected to play a bigger role in the coming years. To sustain investment-led growth, all states will need to actively improve their business environment alongside the Centre's continued focus on infrastructure development.
NITI Aayog says the Investment Friendliness Index combines official data with feedback from investors to give states a clearer picture of their strengths and weaknesses. Besides measuring performance, the index is expected to guide policy reforms, remove investment hurdles and help states become more competitive in attracting capital, supporting India's long-term development ambitions.
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