New states challenge industrial giants, but both have work cut out

Contenders redraw India's economic map, yet ground-level reform struggles

For years, India’s investment map had a settled hierarchy: Maharashtra and Gujarat dominated, with Tamil Nadu close behind. It was a map you could draw from memory. Today, that map is being redrawn as states scramble for high-value industrial projects. 

An inter-state race for private capital has become markedly more crowded — and less predictable. Over the three years to FY26, Andhra Pradesh, Rajasthan, Madhya Pradesh, and Uttar Pradesh have muscled into a hierarchy once reserved for a familiar few, according to data from tracking firm Projects Today. 

Fresh investments announced nationwide swelled from ₹35.2 trillion in FY24 to ₹58.3 trillion in FY26 — a rise of nearly two-thirds in three years. The private sector did the heavy lifting: About seven of every ten rupees announced in FY26 came from private promoters, both Indian and foreign, rather than the state. 

Public investment has concentrated on transport and urban transit, whereas private capital is targeting high-growth sunrise sectors, from renewable energy and green hydrogen to semiconductors and data centres. 

Yet traditional heavyweights — steel, aluminium, cement and petrochemicals — continue to anchor overall investment volumes, driven by persistent demand from ongoing infrastructure and industrial expansion. 

“Most of these sectors are highly capital intensive and require large-scale investments. As a result, the number of mega projects has increased significantly in recent years and has become an important factor shaping the investment rankings of states,” said Shashikant Hegde, founder-director of Projects Today. 

The top 10 states still dominate the landscape, capturing up to 73.7 per cent of all projects and 80 to 82 per cent of total investment value over the three-year period. But beneath that headline figure, the ranking within that group has become contested. 

No state embodies this shift like Andhra Pradesh. Ranked ninth in FY24 with just ₹1.06 trillion in investment announcements, it surged to fifth a year later — and landed second in FY26, trailing only Maharashtra, with ₹8.95 trillion. 

Rajasthan climbed from eighth in FY24 to third in FY26. Its investment announcements more than quadrupled in FY25 and grew another 14.2 per cent in FY26. Madhya Pradesh, long a peripheral player in the investment race, moved from tenth in FY24 to seventh in FY25 and held there. 

The top states haven’t faltered — they’re just facing tougher competition. Maharashtra held the top spot throughout, capping FY26 with a record ₹11.05 trillion haul (up 39 per cent). Meanwhile, Gujarat’s slip to fourth is mostly optical: Announcements stayed above FY24 levels, and its mega-project count actually grew from as many as 95 to 117. 

“The decline in ranking reflected faster investment growth in Andhra Pradesh, Rajasthan, and Odisha rather than a deterioration in Gujarat's performance,” Hegde noted. 

Tamil Nadu, by contrast, dropped out of the top 10 in FY25 — replaced by Chhattisgarh — before returning to tenth in FY26. The shift underscores the volatility at the bottom of the rankings, where a single mega-project can swing a state’s standing. 

Madan Sabnavis, chief economist of Bank of Baroda, said the greater competition among states is helping diversify business investment, creating demonstration effects that encourage other states too. 

“The churn reflects the growing competitiveness of states rather than a loss of attractiveness for established industrial centres like Gujarat and Maharashtra,” said Harshal Patel, senior research associate at Emkay Global Financial Services. 

These shifting numbers reflect a shift in policy, as state governments remove frictions for investors. 

Chhattisgarh, which entered the top 10 group in FY25, has passed the Ease of Doing Business Act, 2026, a risk-based regime allowing low-risk enterprises to rely on self-certification and deemed approvals. Meanwhile, the Rajasthan Investment Promotion Scheme (RIPS 2024) woos private capital across manufacturing, services and small businesses. 

That’s where NITI Aayog’s new Investment Friendliness Index adds a crucial — and humbling — reality check. Released in July, the inaugural 100-point ranking evaluates all 36 states and Union Territories across eight pillars and 84 indicators. 

Its most arresting finding is how modest the scores are. No state crosses 60. Gujarat tops the index at 56.6, followed by Maharashtra (53.7), Tamil Nadu (53.3) and Goa (53.1). 

Comparing the two rankings exposes glaring gaps. Andhra Pradesh claimed the second-largest share of fresh investment in FY26 but ranks eighth on friendliness. Uttar Pradesh, ninth by announced value, sits 19th on readiness. 

The dynamism is real: The Gujarat-Maharashtra duopoly no longer defines Indian industry and the field is broadening. But headline announcements are not ground-level execution. NITI Aayog’s index is a stark reminder that even front-runners have a long way to go before their ecosystems become truly investor “friendly”.