Why you should invest in India now: The new investment friendliness index is a game changer

In an era where India is emerging as a prime destination for foreign investment, the recent launch of the Investment Friendliness Index in the Union Budget 2025 marks a pivotal shift in the country’s economic framework. This initiative aims to enhance both competitive and cooperative federalism, making states more attractive to domestic and international investors.

The Investment Friendliness Index is more than just a ratings system—it evaluates and ranks Indian states based on their investment potential. By fostering healthy competition, it encourages states to reassess and refine their regulatory frameworks, spurring an influx of private investment. For financial institutions like HDFC Securities, the index serves as a valuable guide for navigating the investment landscape and identifying promising regions.

Key parameters and their impact

The index will assess critical factors such as ease of doing business, infrastructure quality, economic stability, taxation policies, labor market conditions, and innovation ecosystems to provide a comprehensive evaluation of each state’s investment climate. This will empower investors with reliable data for informed decision-making.

Enhanced transparency and accountability are key features of the index. By employing clear, quantifiable metrics, states will be incentivized to improve their regulatory frameworks and infrastructure, making them more appealing to investors. For brokerage firms like HDFC Securities, access to this data will facilitate better investment advisory services across various sectors.

Contextual developments

The launch of the Investment Friendliness Index is complemented by initiatives such as a new urban challenge fund and a Fund of Funds for startups, reflecting the government's commitment to fostering an investor-friendly environment. Additionally, programs like the National Manufacturing Mission align with the index’s parameters, ensuring they support national goals and international best practices.

With the index’s release just months away, investors stand to gain valuable insights. Platforms like HDFC Securities’ online trading services will provide seamless access to emerging opportunities from this initiative.

Sectors set for growth

India’s diverse economy presents numerous sectors poised to benefit from improved investment conditions. Information technology, pharmaceuticals, automotive, and renewable energy are particularly promising, supported by initiatives like Make in India and liberalized foreign direct investment policies. The implementation of the Goods and Services Tax (GST) has further streamlined tax compliance, fostering a more transparent business environment.

Special Economic Zones (SEZs) continue to attract foreign investments by offering tax incentives and dedicated infrastructure. HDFC Securities is well-equipped to assist investors with a comprehensive range of investment products and services, including mutual funds and portfolio management.

Challenges and the road ahead

While the Investment Friendliness Index presents significant opportunities, it also faces challenges. Ensuring accurate and consistent data across states requires robust collection methods and transparent evaluation techniques. Additionally, motivating states to adopt reforms based on the index’s findings will necessitate strategic incentives and capacity-building support.

As India competes with other emerging markets for foreign investment, the index must effectively highlight the country’s unique advantages. Financial intermediaries like HDFC Securities must respond by providing high-quality research and advisory services to help investors make informed decisions.

The Investment Friendliness Index is set to enhance India’s appeal as an investment destination, promoting competitive federalism among states. As its launch approaches, monitoring its impact will be crucial in driving concrete economic progress at the state level.

In this transformative landscape, now is the time to invest in India. With the right approach, we can seize the moment and steer collective growth in the global economy.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)