Gujarat continues to have highest investment potential: NCAER study

State top-scores on economic climate and perception, Delhi leads on infrastructure

Gujarat continues to have the highest potential to attract investment for the second year in a row, a survey by economic policy think tank National Council of Applied Economic Research (NCAER) revealed on Tuesday.

Covering 20 States and Delhi, the second edition of the annual NCAER State Investment Potential Index (N-SIPI 2017) survey ranked states' on their competitiveness in business and their investment climate.

Gujarat led the charts, top-scoring on economic climate and perception while Delhi scored the highest on infrastructure.

Apart from these, states were also ranked based on labour, governance & political stability and land.

NCAER expects the survey to provide metrics of economic governance, competitiveness and growth opportunities at the state and regional levels. The Index is designed to provide a systematic and reliable "go-to" reference for policy makers, existing businesses and potential domestic and overseas investors, it said.

"Investment opportunities are expanding in India in all sectors. The GST will weave India's states together in ways that has not been possible before. Now, more than ever, there is a need to provide a systematic and reliable 'go-to' reference focusing on India's states for potential domestic and overseas investors", NCAER Director General Shekhar Shah said.

Corruption continues to be the number one constraint faced by businesses, as found in both editions of the survey so far, Indira Iyer, team leader for the 2017 N-SIPI said. However, the perceptions of corruption may be changing. While 79 per cent of respondents had in 2016 cited corruption as a constraint to conducting business, the figure was 57 per cent in 2017.

On the other hand, getting approvals for starting a business is still the second-most pressing constraint faced by businesses in 2017 as was the case in 2016. Again, the percentage of firms reporting this has decreased from 72 per cent to 53 per cent.

Apart from these, the latest survey throws up the availability and quality of skilled labour, access to finance and tax policy as other major issues of concern to businesses.

Although Bihar, Uttar Pradesh and West Bengal are ranked among the least favourable states for investment, their rank higher under individual metrics. While Bihar fared better on labour and Uttar Pradesh on land, West Bengal scored on economic climate.

On the infrastructure pillar, Maharashtra, Karnataka and Odisha moved closer to the frontier, while Uttarakhand and Assam moved further away.

A team from the World Bank is on the other hand expected to visit India shortly to examine reforms for its similar Ease of Doing Business index.

After pinning its hopes on a significant improvement last year, India has managed to move up by only one rank in the Doing Business Report 2017. It had moved up by only one rank, to 130th in 2016.

The Department of Industrial Policy and Promotion (DIPP), had last month pointed out to the World Bank the changes to the legal framework regarding a number of reforms undertaken by it, which had not been considered in the 2016's report.

This includes reforms in enforcing contracts and easing arbitration.