Gujarat Tops NITI Aayog’s First Investment Friendliness Index for States

The introduction of NITI Aayog’s Investment Friendliness Index (IFI) marks a significant moment in terms of India’s investment climate. The purpose of the index is to gauge how ready each of the 36 States and Union Territories in India are for accepting the investments based on different parameters of governance and economy, thus allowing the policymakers to know the strengths and weaknesses of each State Union Territory. This time, Gujarat was declared the best large State, whereas Goa was revealed as the best Union Territory and city State in ITI’s first ranking of investment friendliness of various regions of India. The index’s main purpose is not to create a competition, but rather to serve as a measure for the approval of the policies and engagement in reforms aimed at boosting investment climate across the country.

What is the Investment Friendliness Index?

The Investment Friendliness Index (IFI) is a new benchmarking mechanism launched by NITI Aayog to assess how friendly each State and Union Territory is for the attraction and sustenance of investments.

The index evaluates total investment readiness through 84 indicators structured into eight important pillars. Although not a conventional ranking exercise, the IFI seeks to provide governments with insights into their performance so that appropriate reforms to facilitate ease of doing business and investment climate may be introduced.

A major revelation made by the first edition is the fact that no State or Union Territory has crossed the 60-point mark on a scale of 100, and showing that there is still a lot to do.

Gujarat Becomes the Top-Performing Large State

Gujarat has attained a score of 56.6 out of 100 among the 17 large states of the India comfortably becoming the best performing large state in country.

Top Four Large States

It is because of the high score in the areas of infrastructure, quality of power supply, and efficiency of ports which makes Gujarat one of the most attractive investment options in the country.

Eight Pillars Used to Assess Investment Friendliness

The Investment Friendliness Index evaluates the each State and Union Territory by using eight broad pillars that influence investment decisions.

These includes,

1. Infrastructure
2. Business Climate
3. Resources
4. Government Policy
5. Regulatory Ease
6. Financial Health
7. Institutional Environment
8. Environmental Resilience

Top Performers Across Categories

The creative efforts of the states and territories have been categorized in several ways under the Investment Friendliness Index.

1. Major States

• Gujarat
• Maharashtra
• Tamil Nadu
• Odisha

2. Hilly and North Eastern States:

• Uttarakhand (Score: 47.5)
• Assam
• Himachal Pradesh

3. City States & Union Territories:

• Goa (Score: 53.1)
• Delhi
• Chandigarh

Indeed, there were five jurisdictions that scored above the 50-mark and were called the “Top Performers”. The jurisdictions include,

• Goa
•  Gujarat
• Maharashtra
• Odisha
• Tamil Nadu

Moreover, a total of 15 states/UTs were placed in the category of “Frontrunners” with scores ranging from 45 to 50 while eight other states/UTs were classified as “Aspiring States” with scores below 40.

Individual Pillar Leaders

According to one of the findings of the report, there is no one state that has performed well in all aspects.

Infrastructure

• Chandigarh scored highest at a national level (15/25).
  Gujarat was the leading state amongst large states with a score of 13.7 due to good ports and reliable power.
• Himachal Pradesh did well amongst hill states.

Business climate

• Amongst large states, Maharashtra did the best.
• Amongst city-states, Delhi ranked on top.
• Sikkim emerged the best in the hill and northeastern states.

Resources

• Goa got the highest score.
• Odisha was the performing state amongst large states.
• Himachal Pradesh scored high amongst hill states.

Government policies

• Madhya Pradesh was the leading large state.
• Puducherry was the leading city-state.
• Assam did well for hilly states.

Ease of regulations

• Chhattisgarh was the leading state.
• Goa and Meghalaya scored highest in their respective areas.

The results suggest that the states have excelled in several areas of investment facilitation.

NITI Aayog: The Index Is Not a Competition

During the launch of the report, NITI Aayog Vice Chairman Ashok Lahiri insisted that this initiative was never meant to spur competition amongst the states.

According to him, the aim of the index is to provide feedback based on facts and allow governments to target areas where reforms are necessary.

He pointed out that while the national government lays down the policies in general terms, ultimately the money gets invested in the states, emphasizing the fact that reforms at the state level will be necessary to realize the Viksit Bharat vision.