New Delhi [India], July 18 : States will play an increasingly important role in attracting private investment and driving India's long-term economic growth, with NITI Aayog's newly launched Investment Friendliness Index intended to serve as a reform tool to strengthen state-level investment ecosystems rather than merely rank their performance, according to the report.
The report said achieving the vision of Viksit Bharat by 2047 will require a sustained increase in productive investments, with state governments expected to play a larger role in improving ease of doing business, infrastructure, policy predictability and regulatory efficiency to attract domestic and global investors.
"The Investment Friendliness Index has been developed to understand how well Indian states are positioned to attract investments," the report said, adding that it evaluates what makes a state attractive for investors as well as the challenges they face.
According to the report, investments have accounted for more than half of India's economic growth since the early 1990s, while the country will need stronger investment-led growth to achieve higher long-term economic expansion. It noted that private investors ultimately make location-specific decisions based on state-level factors such as infrastructure quality, regulatory certainty and institutional effectiveness.
The report said the Investment Friendliness Index has been designed to help states benchmark their performance, identify policy gaps and adopt best practices to continuously improve their investment climate. It added that the index is intended to encourage healthy competition among states while promoting cooperative federalism and enabling policymakers to monitor reforms over time.
According to the report, states that have strengthened investor facilitation through measures such as single-window clearance systems, dedicated investor grievance redressal mechanisms and plug-and-play industrial infrastructure have reported higher capital commitments and faster project execution, highlighting the importance of institutional responsiveness alongside industrial capacity.
The report also noted that while government and household investments have driven post-pandemic capital formation, private corporate investment is expected to play a larger role going forward. It said equal participation from states would be necessary to improve the investment environment as the government continues infrastructure development and seeks to sustain investment-led growth.
NITI Aayog said the index combines public data with investor perception surveys to provide states with a roadmap for improving investment competitiveness. Besides benchmarking performance, it is expected to help governments formulate policies, reduce investment bottlenecks and strengthen their ability to attract capital, supporting India's long-term development goals.