New Delhi, Feb 2 (PTI) – The Finance Ministry, in collaboration with Niti Aayog and the Department for Promotion of Industry and Internal Trade (DPIIT), is set to finalize the criteria for the upcoming Investment Friendliness Index of States, aimed at fostering a competitive environment among states to attract private investments, Expenditure Secretary Manoj Govil revealed on Sunday.
The initiative, first announced in the Union Budget 2025-26, aligns with the government’s push for competitive cooperative federalism, encouraging states to refine their regulatory frameworks and business policies to enhance investor confidence.
“The objective is not just to rank states but to encourage them to introspect on their own policies and procedures. This will help them understand which regulations are perceived as burdensome or unworkable by investors and how that impacts their ability to attract investments,” Govil stated.
“For example, if one state requires an investor to complete 15 procedures to set up a factory while another requires only five, then the lagging states can learn from the streamlined processes of others,” Govil explained.
Currently, DPIIT already conducts an annual Ease of Doing Business ranking, along with evaluations on logistics infrastructure and regulatory environments. The new Investment Friendliness Index is expected to complement these efforts by providing deeper insights into the specific barriers investors face at the state level.
With the groundwork underway, the index is poised to become a key driver of economic reforms across Indian states, paving the way for enhanced investment inflows and a more business-friendly environment nationwide.
The initiative, first announced in the Union Budget 2025-26, aligns with the government’s push for competitive cooperative federalism, encouraging states to refine their regulatory frameworks and business policies to enhance investor confidence.
Encouraging States to Reform Business Policies
In an exclusive interview with PTI, Govil highlighted that while several reforms have been implemented at the central level, investors still encounter regulatory hurdles at the state level. The Investment Friendliness Index will serve as a guiding tool for states, urging them to identify and amend policies that may be discouraging potential investors.“The objective is not just to rank states but to encourage them to introspect on their own policies and procedures. This will help them understand which regulations are perceived as burdensome or unworkable by investors and how that impacts their ability to attract investments,” Govil stated.
Index to Offer Insights, Not Just Rankings
The timeline for the index’s rollout will be determined jointly by the Department of Economic Affairs, Niti Aayog, and DPIIT. The framework is still under development, with authorities working on selecting the most relevant parameters to ensure a fair and actionable assessment of states’ investment climates.“For example, if one state requires an investor to complete 15 procedures to set up a factory while another requires only five, then the lagging states can learn from the streamlined processes of others,” Govil explained.
States to Play a Key Role in Reform
Govil emphasized that state governments themselves must take the lead in reforming business policies, as they have the most significant impact on regional investment decisions. He added that all states would benefit from more private sector participation and would be motivated to improve their regulations accordingly.Currently, DPIIT already conducts an annual Ease of Doing Business ranking, along with evaluations on logistics infrastructure and regulatory environments. The new Investment Friendliness Index is expected to complement these efforts by providing deeper insights into the specific barriers investors face at the state level.
With the groundwork underway, the index is poised to become a key driver of economic reforms across Indian states, paving the way for enhanced investment inflows and a more business-friendly environment nationwide.