Context: NITI Aayog launched the inaugural Investment Friendliness Index (IFI) to benchmark and promote state-level business reforms under the Viksit Bharat @2047 vision.
About The Investment Friendliness Index (IFI):
What It Is?
- The Investment Friendliness Index is a comprehensive, structured, and evidence-based macroeconomic assessment framework. It evaluates how effectively India’s subnational governments create, enable, and sustain an environment that attracts domestic and foreign private capital.
Published By: The index is developed and published by NITI Aayog (the National Institution for Transforming India).
Aim: The objective of the IFI is to strengthen the spirit of competitive and cooperative federalism across subnational governance.
Criteria and Pillars Used for Evaluation:
The Investment Friendliness Index covers all 28 states and 8 Union Territories and evaluates investment attractiveness across the following eight pillars:
- Infrastructure
- Business climate
- Resources
- Government policy
- Regulatory Ease
- Institutional Environment
- Financial Health; and
- Environmental Resilience
Key Features of the Index:
- Four-Tier Performance Banding: States and UTs are grouped into four clear performance cohorts based on their cumulative scores:
- Top Performers (scores above 50)
- Frontrunners (45–50)
- Emerging Performers (≥40 – <45)
- Aspiring States (below 40)
- Equitable Peer-Group Comparisons: Recognizing geography and economic scale, the index splits regions into three distinct peer groups: Large States, Hilly & North-Eastern States, and Union Territories & City States.
- Investor Perception Integration: The index incorporates primary responses from 1,850 active investors.
- Detailed Actionable State Profiles: Each state receives a dedicated diagnostic profile mapping indicator performance against regional peers.
Key Findings:
- Top Performers: Only five states scored above 50—Gujarat (56.6), Maharashtra (53.7), Tamil Nadu (53.3), Goa (53.1), and Odisha.
- Drivers of Success: Gujarat excelled in ports and infrastructure; Maharashtra in business climate and PE/VC investment; Tamil Nadu in exports and manufacturing.
- FDI Concentration: Maharashtra, Karnataka, Gujarat, Delhi, and Tamil Nadu account for 85% of India’s FDI, while the Northeast receives less than 1%.
- Investment Trends: Total investment reached 29.9% of GDP (FY2025), led by government infrastructure and household real estate spending.
- Private Capex Gap: Private capital expenditure (8.7% of GDP) continued to lag behind public investment, highlighting the need to boost private sector participation.
