Niti Aayog to launch index to rank states on investment potential

New Delhi: The NITI Aayog will soon launch an index to rank states on their investment potential around two primary dimensions of opportunity and risk, said people aware of the development.

The government's public policy think-tank will also develop an investor-friendly charter for states, which will include modification of laws, reforms related to the requirement of clearances and licensing, ensuring availability of land through land banks, availability of electricity and water, and appropriate incentives to attract investments.

"The idea is to create competition among states towards achievement of the charter by periodic monitoring and publication of state performance on the points listed in the charter," an official said on the condition of anonymity.

As per the latest data, India's foreign direct investment (FDI) inflows surged 45% year-on-year to $29.79 billion in the first six months of this fiscal, as against $20.5 billion in the year-ago period.

The Aayog has already launched stakeholder consultations and will soon firm up the indicators for investment potential of states around opportunity and risk.

The sub-indicators under the opportunity dimension will include state government's policy and incentives, while the risk dimension will include pillars like natural risk, regulatory risk, financial risk and institutional effectiveness.

Some perception-based indicators will also be included to measure how investors perceive and prioritise opportunities and risks, and to assess the quality of investor experience on certain rules and regulations, said another official.

During the governing council meeting of the Aayog in July 2024, Prime Minister Narendra Modi had tasked it with developing an investor-friendly charter for states.

The government is of the view that it is essential to assess the opportunities that a state offers in terms of infrastructure, incentives and manpower, to name a few, from an investor's perspective, besides understanding the risks associated with investing in that state.

The objective of the stakeholder consultation is to gather insights directly from a diverse set of stakeholders to identify the key parameters and factors they consider while choosing a location for investment.

The consultation will also help ensure that the framework accurately reflects ground realities, prioritises investor concerns and highlights the most impactful indicators for assessing state investment attractiveness.