Gujarat tops NITI Aayog's Investment Friendliness Index 2026
NITI Aayog released its first-ever Investment Friendliness Index 2026, ranking all 28 states and 8 Union Territories on their ability to attract private investment.
Gujarat topped the "large states" category (17 major states assessed) with a composite score of 56.6 out of 100.
Maharashtra and Tamil Nadu followed closely, about three points behind Gujarat, with Odisha in fourth place at 52.4.
Gujarat's performance was attributed to strong port operations and power-sector infrastructure, policy stability, and an efficient single-window clearance system; Maharashtra's strength lay in attracting private equity and venture capital, and Tamil Nadu's in infrastructure and export performance.
The index used eight pillars — infrastructure, business climate, resources, government policy, regulatory ease, institutional environment, financial health, and environmental resilience — to construct state-wise scores, with the stated goal of driving reform competition among states in the run-up to the "Viksit Bharat by 2047" target.
NITI Aayog: Composition and Mandate
NITI Aayog (National Institution for Transforming India) replaced the Planning Commission in January 2015 as the Union government's premier policy think tank. It is chaired by the Prime Minister and has a Governing Council comprising all state Chief Ministers and Lieutenant Governors of Union Territories, along with a full-time CEO and Vice-Chairperson. Unlike the Planning Commission, NITI Aayog has no power to allocate plan funds to states — its role is confined to policy advocacy, knowledge/innovation support, and monitoring, making it an advisory rather than an executive body.
Key Details
- Established via a Cabinet resolution (not a constitutional or statutory body) on 1 January 2015.
- Core functions: fostering cooperative federalism, formulating strategy and long-term vision documents, and monitoring implementation of Sustainable Development Goals (SDGs) and other index-based rankings (health index, SDG India Index, export preparedness index, etc.).
- Does not have the erstwhile Planning Commission's power over Five-Year Plans or discretionary fund devolution to states.
The Investment Friendliness Index is a typical NITI Aayog output — a diagnostic, non-binding ranking tool meant to nudge states into competitive policy reform rather than a fund-allocation exercise.
Cooperative and Competitive Federalism
Cooperative federalism refers to the Centre and states working collaboratively on national priorities, while competitive federalism describes states competing with each other — often using comparative rankings — to attract investment, capital, and skilled talent, thereby improving governance standards. NITI Aayog has institutionalised this through a series of composite indices (Health Index, School Education Quality Index, Export Preparedness Index, SDG India Index) that benchmark states annually.
Key Details
- The Fourteenth and Fifteenth Finance Commissions increased the states' share of the divisible tax pool, strengthening the fiscal basis for competitive federalism.
- Indices with multiple pillars (like the eight-pillar structure used here) allow states to identify specific policy gaps rather than relying on a single aggregate score.
By publicly ranking states on investment friendliness, NITI Aayog is using competitive federalism as a policy tool — incentivising laggard states to reform business regulations, land and labour policy, and single-window systems to climb the rankings.
Ease of Doing Business and Investment Climate Indicators
India has multiple overlapping frameworks to assess business and investment climate: the DPIIT's Business Reform Action Plan (BRAP) ranks states on ease of doing business reforms, while the World Bank's now-discontinued Doing Business Report ranked countries globally (India rose from rank 142 in 2014 to 63 in 2020 before the report was discontinued in 2021 over data-integrity concerns). Both frameworks assess similar parameters — regulatory clearances, land and construction permits, tax administration, contract enforcement, and infrastructure quality.
Key Details
- DPIIT (Department for Promotion of Industry and Internal Trade) under the Ministry of Commerce and Industry conducts India's State Business Reform Action Plan annually.
- Single-window clearance systems, reduction in compliance burden, and industrial land banks are common reform levers assessed across these indices.
The Investment Friendliness Index adds a state-level, multi-pillar lens (covering resources and environmental resilience, not just regulatory ease) to India's existing investment-climate measurement ecosystem, making it a useful comparative reference for questions on business climate reforms and index-based governance.
- Gujarat: 56.6/100 (rank 1 among large states).
- Maharashtra and Tamil Nadu: ranked 2nd and 3rd, roughly 3 points behind Gujarat.
- Odisha: 52.4 (rank 4).
- Index covers 28 states and 8 Union Territories across 8 pillars: infrastructure, business climate, resources, government policy, regulatory ease, institutional environment, financial health, environmental resilience.
- This is the first edition of NITI Aayog's Investment Friendliness Index.
- NITI Aayog established 1 January 2015, replacing the Planning Commission (est. 1950).