Despite notable progress in India's investment climate over the past five years, investors continue to face significant hurdles related to skilled labour availability, land access, and approval timelines, according to the NITI Aayog's Investment Friendliness Index 2026 report. The report emphasizes that addressing these bottlenecks is critical for attracting further investments.
Progress and Persistent Gaps
The report acknowledges substantial advancements in digital infrastructure, logistics, and sector-specific incentives. However, it notes that operational challenges remain across states. "At the same time, investors continue to highlight challenges related to approval timelines, land access and the availability of skilled labour in high-value sectors. A systematic index therefore becomes essential for understanding both the progress and the gaps," the report states.
States that have strengthened investor facilitation systems have seen better investment outcomes. The report observes, "States that have improved investment facilitation mechanisms, such as single-window clearance systems, dedicated investor grievance redressal units and plug-and-play industrial facilities, have reported higher capital commitments and improved project execution speed. These outcomes demonstrate that institutional responsiveness is just as important as industrial capacity."
Investor Feedback Highlights Common Concerns
The Investment Friendliness Index, prepared by NITI Aayog with CRISIL as the knowledge partner, combines data-based indicators with investor surveys to assess how effectively states and Union Territories attract, facilitate, and sustain investments. Investor feedback compiled in the report shows that concerns over skilled manpower and approval processes are common across several states and Union Territories.
For instance, the report's "Voices from the Ground" section for Jammu and Kashmir states that the region "faces a significant shortage of skilled labour, hindering productivity and growth," adding that the workforce lacks specialised skills and that the single-window clearance system "is not functioning optimally."
Similarly, feedback from Dadra and Nagar Haveli and Daman and Diu calls for "a single window clearance policy" as the current process is "fragmented and time-consuming in providing approvals for businesses and investors." Investors there also pointed to "a shortage of skilled and unskilled labour."
Workforce Development as Policy Priority
The report identifies workforce development as a key area requiring policy attention in several states. In Haryana, it suggests that increasing expenditure on education would help "build a more skilled and competitive workforce for future growth."
In Himachal Pradesh, investor feedback recommends "targeted skilling and industry development initiatives" to address workforce shortages caused partly by migration, while also suggesting that the single-window system be made more efficient by improving responsiveness and streamlining approvals.
Index as Tool for Reform
According to the report, the index is intended not only to rank states but also to help governments identify reform priorities and strengthen their investment ecosystems by improving institutional effectiveness and addressing investor concerns.
