Gujarat tops NITI Aayog's first investment friendliness index; Maharashtra, Tamil Nadu follow

New Delhi: Gujarat has emerged as India’s most investment-friendly state in the first edition of NITI Aayog’s Investment Friendliness Index, ahead of Maharashtra and Tamil Nadu, as the government’s policy think tank unveiled a new framework to assess how effectively states create an environment that attracts and sustains investments.

The report attributes Gujarat’s top ranking to its strong performance across infrastructure, business climate, financial health, regulatory systems and government policies. It cites the state’s well-developed port infrastructure, reliable electricity supply, strong industrial ecosystem and conducive business environment as key strengths.

The index was announced in the Union budget for 2026-27 after Prime Minister Narendra Modi, during the ninth Governing Council meeting of NITI Aayog, called for an “Investment-Friendly Charter”, encouraging states to improve policies, regulatory clearances, land availability, power supply, water access and other factors influencing investment decisions.

Unlike earlier assessments that focused largely on regulatory approvals and procedural reforms, the Investment Friendliness Index considers infrastructure quality, logistics, availability of skilled human resources, institutional capacity, fiscal health, environmental resilience and regulatory predictability to assess a state’s ability to attract, facilitate and sustain investments over the long term.

The rankings assume significance as the Centre looks to strengthen the investment climate across states to sustain the momentum in foreign capital inflows. Against a target of attracting $100 billion foreign direct investment (FDI), gross inflows have risen to a record $94.53 billion in fiscal year 2026 (FY26) from $71.28 billion in FY24.

Ranen Banerjee, partner and leader for economic advisory at PwC India said the ranking is likely to encourage a healthy competition among states to progressively improve their scores.

“An important callout is that the financial health of a state has also been included as a pillar in the index,” Banerjee said.

“Offering incentives is clearly not just enough but the ability to honour the incentive payouts through available fiscal headroom is important for investors and this will possibly help drive some fiscal prudence amongst states. It could nudge them to allocate more to capital spending on infrastructure thus improving the quality of state budget spends too given infrastructure is another pillar in the index,” he added.

Who ranked where

In the overall rankings, the top five were Gujarat, Maharashtra, Tamil Nadu, Goa and Odisha. Fifteen states, including Delhi, Andhra Pradesh and Uttar Pradesh, were placed in the ‘Frontrunners’ category, while eight each were classified as ‘Emerging Performers’ and ‘Aspiring’ states.

Among the large states, Gujarat topped with a score of 56.6, followed by Maharashtra (53.7) and Tamil Nadu (53.3). Uttarakhand emerged as the best-performing state among hilly and northeastern states, ahead of Assam and Himachal Pradesh, while Goa led the rankings among Union territories and city states, followed by Delhi and Chandigarh.

The rankings also reveal varying levels of investment readiness among historically less industrialised states. Odisha emerged as the fifth-best performing large state with a score of 52.4, while Madhya Pradesh ranked seventh with 48.9 points. Uttar Pradesh was placed 19th with a score of 45.0, while Jharkhand and Bihar ranked 25th and 26th with scores of 41.3 and 41.2, respectively.

Maharashtra retained its second position owing to its diversified economy, deep financial markets, strong private equity and venture capital ecosystem and innovation infrastructure, while Tamil Nadu’s rank was supported by its manufacturing base, export performance, efficient port network and higher conversion of investment proposals into operational projects.

The methodology

The framework, developed by NITI Aayog with knowledge partner CRISIL, evaluates states using 84 indicators grouped under eight pillars—infrastructure, business climate, resources, regulatory ease, government policies, institutional environment, financial health and environmental resilience. Together, these measure transport and logistics infrastructure, industrial land and utilities, natural and human resources, governance, fiscal management, policy support and environmental preparedness.

The methodology involved an extensive screening process. The exercise initially identified around 953 indicators drawn from international indices, government databases and academic literature before narrowing them through statistical validation and expert consultations to the final set of 84 indicators. The framework was refined through consultations with central ministries, state governments, industry associations, multilateral institutions, regulators, export promotion councils, consulting firms, investment banks, sovereign wealth funds and private equity investors to ensure it reflected both policy priorities and investor expectations.

Besides official data, the assessment incorporates feedback from more than 1,850 investors and industry stakeholders, capturing on-the-ground experiences relating to approvals, regulatory responsiveness, institutional effectiveness and the overall business environment. According to the report, combining objective indicators with investor perception surveys provides a more comprehensive assessment of investment conditions across states.

NITI Aayog has positioned the Investment Friendliness Index as a policy reform tool rather than merely a ranking exercise. According to the report, it is intended to help governments benchmark performance, identify reform gaps, learn from better-performing peers and continuously strengthen their institutional frameworks, while providing investors with an evidence-based comparison of investment conditions across India.

In a related development, Chhattisgarh has attracted nearly ₹973 crore of investment commitments from four textile and garment companies under its Industrial Development Policy 2024–30. The proposed investments are led by Saravana Mills ( ₹528 crore) and Swift Textiles ( ₹235 crore), with additional commitments from Puneet Creations and Drishti Designs LLP.