The most attractive state in India for foreign investors is Delhi, followed by surprise contenders Tamil Nadu and Gujarat, according to a recent study.
Haryana ranks fourth for the second consecutive year, while Maharashtra is fifth out of the top 21 Indian states listed in the 2018 State Investment Potential Index, which was produced by the country’s National Council for Applied and Economic Research (NCAER).
The annual Index is compiled by assessing the competitiveness of the different Indian states based on six key categories – land, labour, infrastructure, economic climate, political stability and governance, and business perceptions.
This year, the Index produced some surprising results and shows how the act of easing regulatory and operational hurdles has catapulted previously non-performing states to the top of the rankings. Notable contenders here include Tamil Nadu, which rose four places to come in second, and West Bengal, which jumped 11 places to become the 10th most attractive state for foreign investors.
Delhi outperformed Gujarat in terms of its infrastructure and economic environment, where it took the top slot in both categories, while Tamil Nadu came first in the areas of labour and good governance.
The report’s appraisal of business perceptions across the various states was based on industry surveys across 21 states. Key areas covered here included law and order, transparency and how easy it is to secure land approvals.
Gujarat and Haryana ranked highest overall in terms of business perception, but the top performers in each of the six categories considered are shown below, alongside any change from their 2017 rankings:
The most interesting takeaway from the Index was the under-performance on key fronts of Prime Minister Narendra Modi’s home state of Gujarat – even though it slipped from first to only second place this year. The state fared poorly in the following areas:
- Infrastructure: Gujarat ranked eighth here, down from third place in 2017. Gujarat and Orissa fell the most in this category, while Uttarakhand and Telangana performed better than expected;
- Land availability: In 2018, Gujarat ranked 10th in terms of land-related projects that had stalled as well as the availability of land for industry;
- Labour: The state ranked 15th in terms of the least number of man-days lost due to a range of factors, and 18th for labour concerns vis-à-vis employees under contract;
- Tariffs: Gujarat ranked 14th when assessed for industry-friendly tariff structures.
Index complements World Bank/DIPP study
The NCAER positions its State Investment Potential Index as a complement to the World Bank’s Doing Business report as well as another parallel assessment conducted by India’s Department of Industrial Policy and Promotion (DIPP).
The Index focuses on evaluating policy and structural issues organised into six categories to determine the business environment in each state. But the World Bank/Department of Industrial Policy and Promotion (DIPP) Index looks at how to make it easier to do business and undertake transactions in India based on a 405-point action plan to introduce business reform.
Interestingly, the DIPP's Combined Score Card of Reform Evidence and Feedback gives Andhra Pradesh the top slot at 98.3%, followed by Telangana at 98.28% and Haryana at 98.06%. Jharkhand came in fourth at 98.05%, Gujarat next at 97.99%, while Delhi scored a mere 31.69%.
Overall, the Index, when taken in tandem with the DIPP report, provide key on-the-ground insights for foreign investors navigating India’s complicated regulatory network to find the best location for doing business.
Top Indian investment locations
The assessments highlight the need for foreign investors to look beyond Gujarat and Maharashtra when choosing locations to set up in business. This is not least because individual Indian states are increasingly competing among themselves to create a favourable economic environment, build the necessary infrastructure and offer tax incentives and other subsidies in order to woo foreign business.
Here are the Indian state rankings based on the 2018 Index:
This article was first published on India Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
OTHER ARTICLES THAT MAY INTEREST YOU
Minding your manners in India: Part one
Stronger wage policies required in India to ensure inclusive growth, warns ILO
Key payroll considerations in India
The most attractive state in India for foreign investors is Delhi, followed by surprise contenders Tamil Nadu and Gujarat, according to a recent study.
Haryana ranks fourth for the second consecutive year, while Maharashtra is fifth out of the top 21 Indian states listed in the 2018 State Investment Potential Index, which was produced by the country’s National Council for Applied and Economic Research (NCAER).
The annual Index is compiled by assessing the competitiveness of the different Indian states based on six key categories – land, labour, infrastructure, economic climate, political stability and governance, and business perceptions.
This year, the Index produced some surprising results and shows how the act of easing regulatory and operational hurdles has catapulted previously non-performing states to the top of the rankings. Notable contenders here include Tamil Nadu, which rose four places to come in second, and West Bengal, which jumped 11 places to become the 10th most attractive state for foreign investors.
Delhi outperformed Gujarat in terms of its infrastructure and economic environment, where it took the top slot in both categories, while Tamil Nadu came first in the areas of labour and good governance.
The report’s appraisal of business perceptions across the various states was based on industry surveys across 21 states. Key areas covered here included law and order, transparency and how easy it is to secure land approvals.
Gujarat and Haryana ranked highest overall in terms of business perception, but the top performers in each of the six categories considered are shown below, alongside any change from their 2017 rankings:
The most interesting takeaway from the Index was the under-performance on key fronts of Prime Minister Narendra Modi’s home state of Gujarat – even though it slipped from first to only second place this year. The state fared poorly in the following areas:
- Infrastructure: Gujarat ranked eighth here, down from third place in 2017. Gujarat and Orissa fell the most in this category, while Uttarakhand and Telangana performed better than expected;
- Land availability: In 2018, Gujarat ranked 10th in terms of land-related projects that had stalled as well as the availability of land for industry;
- Labour: The state ranked 15th in terms of the least number of man-days lost due to a range of factors, and 18th for labour concerns vis-à-vis employees under contract;
- Tariffs: Gujarat ranked 14th when assessed for industry-friendly tariff structures.
Index complements World Bank/DIPP study
The NCAER positions its State Investment Potential Index as a complement to the World Bank’s Doing Business report as well as another parallel assessment conducted by India’s Department of Industrial Policy and Promotion (DIPP).
The Index focuses on evaluating policy and structural issues organised into six categories to determine the business environment in each state. But the World Bank/Department of Industrial Policy and Promotion (DIPP) Index looks at how to make it easier to do business and undertake transactions in India based on a 405-point action plan to introduce business reform.
Interestingly, the DIPP's Combined Score Card of Reform Evidence and Feedback gives Andhra Pradesh the top slot at 98.3%, followed by Telangana at 98.28% and Haryana at 98.06%. Jharkhand came in fourth at 98.05%, Gujarat next at 97.99%, while Delhi scored a mere 31.69%.
Overall, the Index, when taken in tandem with the DIPP report, provide key on-the-ground insights for foreign investors navigating India’s complicated regulatory network to find the best location for doing business.
Top Indian investment locations
The assessments highlight the need for foreign investors to look beyond Gujarat and Maharashtra when choosing locations to set up in business. This is not least because individual Indian states are increasingly competing among themselves to create a favourable economic environment, build the necessary infrastructure and offer tax incentives and other subsidies in order to woo foreign business.
Here are the Indian state rankings based on the 2018 Index:
This article was first published on India Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
OTHER ARTICLES THAT MAY INTEREST YOU
Minding your manners in India: Part one
Stronger wage policies required in India to ensure inclusive growth, warns ILO
Key payroll considerations in India
