NITI Aayog’s Investment Friendliness Index 2026: All You Need to Know

NITI Aayog released something last week that most government reports never quite manage to be and it’s genuinely useful.

The Investment Friendliness Index 2026 is India’s first-ever attempt to systematically rank every state and union territory on how investor-friendly they actually are. Not on how many MoUs they signed at a global investor summit. Not on how many policies they announced. On what investors actually experience when they try to set up and operate a business.

That distinction is the whole point of this report, and it is also where it gets uncomfortable.

India has genuinely improved. Digital infrastructure is better. Logistics have improved. Sector-specific incentives have multiplied. The government has worked hard on this, and it shows. And yet, the same investors who acknowledge these improvements keep flagging the exact same three problems they have been flagging for twenty years. Land access. Approval timelines. Skilled labour in high-value sectors.

Three things. After two decades of reform. Still unresolved enough that they show up in a 2026 national index as critical bottlenecks.

However, the entire report is quite long; therefore, in this blog, we have broken down the Investment Friendliness Index 2026 report and tried to cover all its main aspects.

What Is the Investment Friendliness Index & Why Does It Matter?

The Investment Friendliness Index 2026 is the first report of its kind released by NITI Aayog. It evaluates all 28 states and 8 Union Territories across a comprehensive framework of 84 indicators grouped under eight pillars, producing a composite score out of 100 for each state and UT.

This is India’s first Investment Friendliness Index. That matters because the World Bank’s Ease of Doing Business ranking, which drove enormous reform energy across Indian states for years, was discontinued in 2021 after methodology concerns. India lost its external benchmark. States lost the competitive pressure that ranking created. The IFI is the homegrown replacement. It was conceptualised after the 9th Governing Council Meeting of NITI Aayog in 2024 and formally announced in the Union Budget 2025-26. CRISIL came on as the knowledge partner.

The framework combines objective data from official sources with findings from a primary survey of actual investors, which is what makes it different from purely data-driven rankings that miss what is happening on the ground. That primary survey component is what makes the IFI different from most governance indices. It is also what makes it uncomfortable, because investors do not always say what the government wants to hear.

What the Eight Pillars Are Actually Measuring?

Understanding the IFI requires understanding what the eight pillars actually assess, because they go significantly beyond what most people think of when they hear “ease of doing business.”

Infrastructure first, covering physical logistics, power supply reliability, and digital connectivity. Then Business Climate, which looks specifically at how well single-window clearance systems work and how smoothly operations can run day to day. Resources comes third, covering industrial land availability, skilled labour pools, and raw material access. These first three are where India’s most persistent investor complaints tend to cluster.

The remaining five are Government Policy, which assesses whether policy is stable and predictable over time. Regulatory Ease, which measures how much bureaucratic friction shows up in compliance and licensing. Institutional Environment, which gets at whether state government institutions are actually capable, transparent, and responsive rather than just formally present. Financial Health, which covers fiscal sustainability and state-level macroeconomic stability. Environmental Resilience, which addresses sustainability and ecological compliance, increasingly important as global investors apply ESG filters to capital decisions.

Across all eight pillars, the index produces a single composite score out of 100 per state or UT. And when you see where most of them land, the picture is sobering.

The Rankings: Who Made It and Where Everyone Else Stands?

Five states crossed the 50-point threshold and were classified as Top Performers. Gujarat led with a score of 56.6 out of 100. Maharashtra followed at 53.7. Tamil Nadu came third at 53.3. Goa and Odisha rounded out the top five.

Read that again. The best-performing state in the entire country, across all 28 states and 8 UTs, scored 56.6 out of 100.

That is not a failure. It reflects a genuinely high bar and a methodology that does not inflate scores. But it is also a clear signal that India, even in its most investor-friendly state, is operating well below its potential on the dimensions that actually move investment decisions.

Fifteen states made it to the Frontrunners category, scoring between 45 and 50. Delhi, Madhya Pradesh, and Andhra Pradesh are in this group. Close to the top, but not there yet.

There are eight states and UTs that belong to the Emerging Performers category, ranging from 40 to 44.9. Some of them include Bihar, Jammu & Kashmir, and Punjab. Another eight states are considered to be Aspiring States, having a score lower than 40, among which there are Arunachal Pradesh, Ladakh, and Lakshadweep.

Peer group comparisons have added a flavour to the general rankings as well. Hilly and Northeastern States included Uttarakhand at the top position, followed by Assam, while Himachal Pradesh was placed third. The ranking of City States and Union Territories saw Goa topping the chart, while Delhi and Chandigarh were placed second and third, respectively.

One finding from Business Standard’s analysis of the report is worth flagging directly: no state performed consistently well across all eight pillars. Even Gujarat, the national topper, has specific weak spots. The challenge of becoming genuinely investment-friendly is not a single-dimension problem, and the states that will improve fastest are the ones that understand that.

The Real Story: What Investors Are Still Complaining About?

This is where the IFI stops being just a ranking exercise and starts being a serious policy document.

The report’s language on persistent investor challenges is unusually direct for a government-released index. It says, in its own words: “Investors continue to highlight challenges related to approval timelines, land access and the availability of skilled labour in high-value sectors. A systematic index therefore becomes essential for understanding both the progress and the gaps.”

Approval timelines are frustrating because the reforms to address them, single-window clearance systems, have largely been implemented on paper across most serious states. But having the system and having the system actually work within committed timeframes are two very different things. The IFI report specifically notes that states with investor facilitation mechanisms that actually function well have consistently shown better investment outcomes. The differentiator is not policy design. It is institutional execution.

Land access involves layers that central or state policy alone cannot quickly untangle. Land records in India are fragmented, disputed, and often inaccurate. Acquisition processes touch local politics, court systems, and revenue departments in ways that create unpredictable delays even when intent is present at the policy level. Investors building factories or large facilities cannot absorb multi-year land resolution timelines. They go somewhere else.

Skilled labour availability keeps showing up because India’s vocational and technical training ecosystem has not kept pace with the structure of demand from high-value manufacturing and services. The country produces enormous numbers of graduates. It does not produce nearly enough people with the specific technical skills that precision manufacturing, advanced chemicals, semiconductor packaging, aerospace components, and similar sectors actually need. The demographic dividend that everyone talks about only converts into an investment advantage when the skills match the demand.

None of these three problems is new. All three have been the subject of reform attention for years. The fact that they keep appearing in investor surveys tells you something important: the reforms that exist are not yet solving them at scale. The IFI makes that gap visible and measurable in a way that creates real accountability.

What Does This Mean for Investors and HNIs?

For investors and HNIs tracking India’s investment landscape, the IFI 2026 provides the clearest state-level diagnostic yet of where capital is most likely to find a supportive environment.

These are the top five states where one must base all serious investments in manufacturing, infrastructure, and exports. Gujarat, Maharashtra, Tamil Nadu, Goa, and Odisha clearly have better environments on almost all the dimensions. They may not be the best, but definitely better than the rest.

The Frontrunners deserve careful attention. Madhya Pradesh, Andhra Pradesh, and Delhi are some of the states that are very close to the top but still lag behind. The public ranking below Gujarat and Maharashtra puts pressure on the governments of these states to undertake reforms. This is precisely what provides investment opportunities in the next three to five years.

On land, labour, and approvals: these friction points exist across every state, including the top ones. Anyone evaluating a capital-intensive manufacturing play in India needs to build realistic timelines around these issues rather than assume they are solved.

The bigger picture is this. The IFI is designed to be published every year. Annual public rankings mean state governments face continuous accountability for their investment climate. That sustained pressure tends to produce real reform over time. It did during the World Bank Ease of Doing Business era, and it will again here.

NITI Aayog’s own report notes that investments have driven more than half of India’s economic growth since the 1992 reforms. A credible, annually updated state-level benchmark is the kind of structural tool that can accelerate the next phase of that growth.

In Light Of These Points

Lastly, it would be better to conclude that India’s first Investment Friendliness Index delivers two messages simultaneously, and understanding both is more useful than celebrating only one.

The first message: India has made substantial progress in building the infrastructure of an investment-friendly economy. Digital systems, logistics, sector-specific incentives, and the general framework of business facilitation have all improved significantly. The five states topping the ranking represent genuinely competitive investment destinations by regional and global standards.

The second message: The operational gaps that investors have been flagging for years remain stubbornly persistent. Land access, approval timelines, and skilled labour availability are not solved problems. They are defined problems, which the IFI now makes measurable and publicly visible in a way they were not before.

For investors, the IFI’s most valuable contribution is not the rankings themselves. It is the creation of a systematic, annual, data-driven accountability mechanism that forces state governments to compete on the dimensions that actually matter for investment outcomes. That competitive dynamic, operating consistently over the next several years, is the best structural driver of the reforms that will unlock India’s next phase of investment-led growth.

At Bonanza Wealth, we track governance and policy developments like this alongside market and sectoral data because they shape the medium-term investment landscape in ways that take time to show up in quarterly earnings but are highly visible in three- to five-year portfolio outcomes. If you want to understand how India’s evolving investment climate should factor into your portfolio thinking, our team is here to help you work through it with the depth it deserves.

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