Divya Agarwal
New Delhi: With more competitive offers to domestic and international investors, Indian states have shifted their focus from incentives to the other factors like the policy stability, ease of doing business and infrastructure. Investors today are more interested in the extent to which states can enable long-term growth of businesses.
In this context Gujarat has become the first state to be ranked first in NITI Aayog’s Investment Friendliness Index (IFI) for States and Union Territories (Uts) making it one of the most preferred places of investment in the country. The index measures states based on various factors such as governance, infrastructure, regulatory environment, and business environment and its support for investments.
The recognition comes on top of Gujarat’s impressive industrial tally. It is one of the largest industrial economies of India, contributing approximately 18% of the country’s industrial production, 28% of manufacturing production and 1/3 of the country’s merchandise exports.
Gujarat is one of the most fortunate states in the country because of its diverse economy. The state’s economy is not reliant on any single sector, but is built on diverse manufacturing clusters in the chemicals; petrochemicals; pharmaceuticals; engineering; automobiles industries and in renewable energy. This growth has been aided by its infrastructure. Gujarat has 48 non-major ports and one major port that offer efficient connectivity to the domestic and international markets for industries. The state has additionally boosted its competitiveness thanks to well-developed road networks, industrial corridors and logistics facilities.
In addition to physical infrastructure, Gujarat has been consistently working towards reducing investments and operation hurdles for businesses. Over the years, improvements in the investment climate have been realised, including through the provision of digital approvals, single window clearance systems and quicker project implementation. The state’s performance is also reflected in foreign investment trends. Gujarat has received ₹3.47 lakh crore foreign direct investment (FDI) till March 2025, which added up to 16.5% of the country’s total FDI value during the period, the Department for Promotion of Industry and Internal Trade (DPIIT) stated.
Gujarat’s growth story still revolves around manufacturing. The state accounts for over 60% of India’s petrochemical production, and a chemical share of more than 53% of India’s chemical output, and one of the largest pharmaceutical manufacturing centres in the country. Gujarat is also transitioning from the traditional industry to drawing investments into the renewable energy, semiconductor manufacturing, electronics, electric mobility, green hydrogen and other sectors. These sectors are in line with India’s overall thrust for boosting domestic manufacturing and creating a robust supply chain.
The state continues to make uninterrupted investments in skill development, logistics and industrial infrastructure, enhancing support for the state’s industrial ecosystem. The fact that it has an existing manufacturing base, proactive policy and strategic coastal position has facilitated the expansion of domestic and multination companies with relative ease.
Investment rankings are a useful indicator of state’s efforts to establish a business-friendly environment, but they are not reflective of economic success. Gujarat’s high ranking in the Investment Friendliness Index has been achieved over years of investment in infrastructure, governance reforms and industrial development, and not because of short-term policy changes.
India has been focusing on becoming a hub for manufacturing and investment and Gujarat has the potential to continue to play a strong role in this regard. The state, with its diversified industrial base, excellent logistics network, policy support and increasing footprints in future-oriented industries, is well-positioned to be one of the most preferred states for domestic and foreign investments.
