States' investment friendliness index to be launched in 2 months: NITI

Don't want to miss the best from Business Standard?

NITI Aayog member Arvind Virmani has said that work on the second phase of the investment friendliness index of states is in progress and it is expected to be released in a month or two.

The Union government in its FY26 Budget announced the launch of the 'Investment Friendliness Index of States' in 2025 to further the spirit of competitive cooperative federalism. This index will motivate states to review regulations to identify what is impeding investment. The initiative aims to promote healthy competition among states to attract private investment.

The Ministry of Finance is working on the parameters related to 'Investment Friendly Index of States' in consultation with NITI Aayog and the Department for Promotion of Industry and Internal Trade (DPIIT).

In an interview with PTI-Bhasha, Virmani said, "The first phase of preparing the index has been completed. Work is going on in the second phase. In this, suggestions are being taken from the industry. The opinion of the industry is important in the index because they have to make the investment. Necessary improvements will be made in it based on the suggestions."  About the expected timeline for the release of the index, he said, "I cannot give any specific date about this. But the index is expected to be released in a month or two."  Virmani said, "The prime minister had instructed us that all states should get the benefit of FDI (Foreign Direct Investment) and private investment. Overall, all states will benefit from this and investment and manufacturing will increase. Overall, the economy of the states will get a boost. They will be able to tell their strengths in this and work will be done to correct the shortcomings."  Earlier, Expenditure Secretary Manoj Govil had told PTI that several regulations and reforms have been done at the Centre level but some investors feel similar reforms are needed at the state level too.

"The main idea behind this index is not to rank states and say which one is good or bad. Its purpose is to motivate states to look at their own rules, regulations and procedures. To help them figure out which rules investors find practical or difficult...," Govil said.  Salaries not keeping pace with inflation

Niti Aayog member Arvind Virmani also said that while employment is increasing in India, real wages for regular jobs have not kept pace with inflation over the past seven years.

India has an opportunity in terms of global population, and there is a need to take advantage of it. For this, improving the quality of teaching and training is important, he noted.

He said, "According to PLFS (Periodic Labour Force Survey) data, the worker-population ratio has been clearly increasing in the last seven years. This means that the number of jobs is increasing more than the population growth. There are fluctuations in this too but the trend shows that jobs are increasing. Therefore, it is wrong to say that jobs are not increasing".

As per the PLFS Annual Report 2023-24 (July-June), the worker-population ratio in terms of persons of all ages increased to 43.7 per cent in 2023-24 from 34.7 per cent in 2017-18.

"If we look at the wage data in PLFS, the real salary of casual workers has increased during the seven years and their condition has improved during this period. The figures confirm this.

"But a bigger issue is in the case of regular salaried jobs. In this category, real wages have not increased in line with inflation in seven years," the economist said.

"As far as my assessment is concerned, the main reason for wages not increasing as per inflation is the lack of skills. We are not hiring skilled jobs. I have seen the data of many countries... based on that, I would say that we need to work on this (skill). It is in a very weak state. The central government is taking steps. States also need to work in this direction, work needs to be done at the district level because jobs will be created there."  This is important because when skills increase, productivity increases and real wages increase. This happens in India as well as in the world. Skill development is needed not only for those who are already working but also for the new people who are coming in, the Niti Aayog member said.

"According to the analysis we have done, skill development is needed at every level of education. Many children drop out of school midway, they need to be given skills accordingly. It is not that everyone needs skills only to become an AI (artificial intelligence) or electronic engineer. We also have to think about those children who drop out of school midway," Virmani said.

The major problem is the lack of quality education and skills. Skills need to be improved at every level -- lower, middle and higher. We need skills for all kinds of jobs, he added.

"For a developed India, there is a need for improvement everywhere. We should see the opportunity and use it... We need to take advantage of the opportunities that we have at the level of global demographics. For this, improving the quality of education along with teaching and training is important. Attention needs to be paid here. So that we can reach a higher income level. Similarly, there is a supply chain, which needs to be worked upon," the member said.

"Job and skill are two sides of the same coin. If you have skill then it becomes easier to get a job. This needs to be understood.