How investment friendly is J&K?  NITI’s Aayog’s First Investment Index has mixed ratings

Ziraat Times Team Report

J&K shows progress in reforms and policy initiatives but lags behind leading states in infrastructure, investor confidence and institutional capacity

Srinagar, July 17: Jammu & Kashmir has been placed among India’s “Emerging Performers” in the first-ever Investment Friendliness Index (IFI) released by NITI Aayog today, reflecting steady progress in improving its investment climate while also highlighting substantial challenges that continue to impede the Union Territory’s competitiveness in attracting private investment.

The Investment Friendliness Index, announced following the Union Budget 2025-26 and prepared on the directions of Prime Minister Narendra Modi after the 9th Governing Council meeting of NITI Aayog, evaluates all 28 states and eight Union Territories on their ability to create and sustain an investor-friendly ecosystem.

The assessment is based on 84 indicators spread across eight broad pillars: infrastructure, business climate, resources, government policy, regulatory ease, institutional environment, financial health and environmental resilience.

Nationally, Gujarat emerged as India’s most investment-friendly state, followed by Maharashtra and Tamil Nadu, while Goa and Odisha completed the list of top performers.

States and UTs were classified into four categories:

• Top Performers: Score above 50

• Frontrunners: Score between 45 and 50

• Emerging Performers: Score between 40 and 45

• Aspiring States: Score below 40

Jammu & Kashmir has been placed in the Emerging Performers category, indicating that while the UT has made notable advances in reforms and policy frameworks, it still trails the country’s leading investment destinations.

Comparison with Peer States

Recognising geographical and administrative differences, NITI Aayog separately evaluated states within peer groups. J&K was assessed under the Hilly and North-Eastern States category, where Uttarakhand secured the top rank, followed by Assam and Himachal Pradesh.

The report suggests that these states have generally performed better in developing infrastructure, industrial ecosystems and investor confidence.

Areas of Strength for J&K

The report acknowledges the significant reforms undertaken by Jammu & Kashmir in recent years, particularly after the introduction of the New Central Sector Scheme for Industrial Development, which offers one of India’s largest industrial incentive packages.

J&K has also introduced:

• Single-window clearance systems;

• Digitisation of approvals and regulatory processes;

• Industrial land banks and new industrial estates;

• Sector-specific policies for tourism, film production, IT and renewable energy.

These initiatives have contributed positively to the UT’s performance in the government policy and regulatory ease pillars.

The report notes that policy predictability and proactive government support are increasingly becoming strengths of the Union Territory.

Infrastructure Remains a Major Constraint

Despite these reforms, the report points to continuing structural bottlenecks.

Infrastructure deficiencies, particularly in logistics, industrial connectivity and availability of serviced industrial land, remain among the major impediments to investment.

While recent infrastructure projects such as the Udhampur-Srinagar-Baramulla Rail Link, major highway tunnels and industrial estate development are expected to improve the investment climate in coming years, investor perceptions regarding ease of operations and project execution remain relatively weak.

The report emphasises that investment decisions are increasingly influenced by:

• quality of physical infrastructure;

• digital connectivity;

• regulatory efficiency;

• institutional effectiveness; and

• predictability of governance.

Investor Perceptions Matter

A significant feature of the IFI is that it incorporates not only secondary data but also primary investor surveys, making it one of India’s first comprehensive investment climate assessments based partly on business perceptions.

For J&K, investor feedback indicates that concerns continue regarding:

• project implementation timelines;

• institutional capacities;

• dispute resolution mechanisms;

• cost of logistics; and

• long-term predictability.

These factors continue to influence private investment decisions despite generous incentive packages.

Why the Index Matters for J&K

The findings assume particular importance for Jammu & Kashmir because the UT administration has repeatedly identified private investment as a key driver of employment generation and economic diversification.

J&K’s economy remains heavily dependent on government expenditure, tourism and agriculture. The administration has sought to increase manufacturing and services investment through industrial policies and incentive schemes.

The report notes that achieving India’s vision of Viksit Bharat@2047 would require a substantial increase in private investment, with states and UTs playing the central role in creating conducive business environments.

Investment Potential Remains Significant

The report also indirectly reinforces J&K’s long-term potential.

The Union Territory possesses several advantages:

• strategic location;

• abundant hydropower resources;

• tourism potential;

• skilled human capital;

• large horticulture economy;

• emerging film and creative industries.

However, translating these advantages into sustained investment inflows would require continued reforms, better infrastructure, stronger institutions and improved investor confidence.

The Road Ahead

NITI Aayog stresses that the Investment Friendliness Index should not merely be viewed as a ranking exercise but as a reform instrument to encourage states and UTs to learn from one another and continuously improve their investment ecosystems.

For Jammu & Kashmir, the report effectively places the UT at an intermediate stage — no longer among the weakest investment destinations, but still some distance away from the country’s leading performers.

The findings suggest that sustained efforts in improving infrastructure, institutional efficiency, financial sustainability and investor confidence could help Jammu & Kashmir move from the “Emerging Performer” category towards becoming a “Frontrunner” in future editions of the index.