Gujarat, Maharashtra, Odisha, Tamil Nadu and Goa have emerged as top-performing states in Niti Aayog’s new Investment Friendliness Index 2026, which ranks states based on quality of infrastructure, business climate, government policy and regulatory ease among other parameters seen as key to attracting investment.
“Our investment rate is around 25%. If you look at China, when it was growing fast, it was investing almost double that amount. We are using our capital very efficiently. But if you look at their investment rate and growth rate, you get the incremental capital-output ratio. China’s incremental capital output ratio is much higher. The index is not a ranking exercise; it is to tell the states that there are indicators where you are doing well and parameters where you can do better,” Ashok Lahiri, Vice Chairman, Niti Aayog, said at a press briefing.
The index covers all 28 states and eight union territories (UTs) and evaluates what makes a state attractive for investors, as well as the challenges investors face.
The highest weight of 25% is assigned to infrastructure, followed by business climate, resources, government policy, regulatory ease, financial health, institutional environment and environmental resilience.
The index categorises Andhra Pradesh, Assam, Chandigarh, Chhattisgarh, Delhi, Haryana, Himachal Pradesh and Karnataka among other states as “frontrunners” and Bihar, Jammu and Kashmir, Jharkhand, Meghalaya, Nagaland, Puducherry, Punjab, West Bengal as “emerging performers”.
Andaman and Nicobar Islands, Arunachal Pradesh, Dadra & Nagar Haveli and Daman & Diu, Ladakh, Lakshadweep, Manipur, Mizoram and Sikkim were categorised as “aspiring states”.
Notably, the top five states — Maharashtra, Karnataka, Gujarat, Delhi and Tamil Nadu — attract 85% of total foreign direct investment (FDI) inflows.
In contrast, states in the northeast receive less than 1% combined, highlighting the widening regional divergence, Niti Aayog report said.
On the infrastructure front, Gujarat retained the top spot, followed by Tamil Nadu and Kerala. Odisha ranked eighth, while Maharashtra and Uttar Pradesh were placed ninth and 10th, respectively.
On business climate, Maharashtra led the rankings, followed by Karnataka and Tamil Nadu.
Punjab ranked eighth, Andhra Pradesh ninth and Uttar Pradesh 10th. In terms of government policy, Madhya Pradesh emerged as the top performer, followed by Gujarat and Rajasthan.
Haryana, Andhra Pradesh and Tamil Nadu were ranked eighth, ninth and 10th, respectively.
The Niti Aayog report said that Japan’s sustained growth after World War II was driven by a significant rise in investments, with the investment rate increasing from 26.7% in 1950-55 to 42.6% by 1973. These investments, particularly in infrastructure, reduced logistics costs and supported manufacturing activity, leading to annual GDP growth exceeding 10% during 1955-60.
India’s investments picked up pace after the pandemic, growing faster than GDP since financial year 2022.
Investments stood at 29.9% of GDP in financial year 2025, a tad higher than the decadal average of 29.1%, the report said, adding that the government and households have been the primary drivers of investment growth in the post-pandemic period.
“Investments by government and public sector enterprises together grew 13.9% (in real terms) between financial years 2022 and 2024 (as per latest data available), followed by household capex (through real estate) at 13.4%. Private capex growth was slower at 8.7%. Although uneven, private investment growth has improved, albeit at a slower rate compared with government and household investments,” the report said.
Notably, the top five states — Maharashtra, Karnataka, Gujarat, Delhi and Tamil Nadu — attract 85% of total FDI inflows. (File Photo) 
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