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Investors' guide to the states of India
Investment Skyline of India is a guideline to the investors for identifying the best states in the country for investment purpose. We plan to take 8-10 broad parameters every quarter and identify the best states for investment in terms of those parameters. The first issue looks at selected demographic, infrastructure and market related parameters and identifies the 5 top states in the country for investments, for each of the parameters.
Our purpose is to identify 5 leading states based on several relevant indicators that reflect investment friendliness. We have captured the state’s position for individual variables as well as collectively through constructing a composite index that accounts for all the variables. The specific indicators that have been selected for the inaugural issue are:
3. Capital formation
4. Infrastructure availability related to power
5. Infrastructure availability related transportation
6. Telecom facilities
7. Health infrastructure
8. Educational infrastructure
9. Market size
To depict the position of each state regarding individual variable, we computed median value for each of these variables. As the next step an index was formed taking the median value as 100 and the top 5 states have been identified based on the index value. To arrive at the final composite index that includes all the variables, we assigned equal weight to each variable. The composite value is the linear combination of each of these variables. After obtaining the composite value, we computed the median. The final index was formed based on the composite values considering the median value as 100.
Additionally, we have mapped the fastest growing districts, in terms of GDP growth over 5 years to identify the emerging pockets of interest for investors.
The Top 5 States in India Based on Final Composite Index
As clearly suggested by the graph below, Maharashtra emerges as the best possible state for investment purpose. The investment friendliness of the rest of the four states are almost equi-level. However, a few other states with closer final composite index value are Karnataka, West Bengal and Uttar Pradesh.
Urban population (1st table and figure)
In terms of the size of urban population in the state, Maharashtra is the top ranking states. However, as per expectation, the bigger states find their place in the top 5 ranks in terms of this indicator.
State’s share to India’s total urban population (2nd table and figure)
Contribution of these 5 top ranking states is exactly half of India’s total urban population. This clearly suggests that the metro cities, namely, Mumbai, Chennai, Kolkata and Hyderabad play a major role in shaping India’s urban population concentration.
Urban growth (3rd table and figure)
It is important to notice that Goa and Mizoram, two smaller states of the country, figure among the top 5 states in terms of urban growth. Along with a faster penetration of urbanisation, smaller urban base in these state is a major force behind this pattern.
Gross State Domestic Product (GSDP) (1st table and figure)
Being the financial and commercial hub of the country, Maharashtra is well ahead of other states. Apart from the 5 top ranking ones, Tamil Nadu and Karnataka can also be considered in the same league.
State’s share in India’s Gross Domestic Product (2nd table and figure)
The top 5 states account for 40% of the total GDP of the country. However, concentration of major economic activities in a few states is established further with the fact that the next 5 states contribute 37% to country’s GDP while the balance 18 states account for 23%.
Average annual growth over last 5 years (3rd table and figure)
The smaller states show faster growth in terms of state income mainly due to their small base of GSDP. Haryana is the only exception, which has been witnessing f