An Attractiveness Index of Indian States

Frost & Sullivan is ready with its Indian States’ Attractiveness Index, an assessment of how individual states within different regions are performing at a broader level and their attractiveness to industry. The study examines the friendliness of states to industry by comparing them across multiple areas. The results of the study highlight the distinguishing aspects of well-performing states that sets them apart from the rest of the pack. More importantly, it is a starting point for state administrations that are interested in enhancing their competitiveness and attracting investments from the industry at large.

Indian States' Attractiveness Index

The results of the in-depth comparative study of states show that the best performing states in each region typically excel in at least one of the areas of assessment. Thus, in the Northern region, Haryana is the most attractive destination for industry on account of its economic and industrial performance as well as its much-publicized infrastructural facilities while in the Southern region, Kerala benefits from its human capital, infrastructure, and economic performance. In the East, West Bengal, despite its anti-industry image, leads the pack although Madhya Pradesh is a very close second. Maharashtra and Gujarat both share the mantle of regional leaders in the West with each of these states excelling in at least three areas. Lastly, in the Northeastern region, Assam excels on the back of its human capital, industry performance, and infrastructure.

Frost & Sullivan developed a very robust methodology which tracks the different elements of state-level performance that were identified and broadly classified into six main buckets. These buckets are natural and human capital, economic growth, fiscal flexibility, infrastructural robustness, industrial development, and monetary stability. The key criterion for selecting an indicator under each bucket was its suitability to ensure comparison, its frequency, and availability. Equally, care was taken to ensure that there was no bias in any of the indicators selected. For instance, under economic indicators, GDP growth rate was taken rather than the actual GDP value, as ranking by GDP value would give a misleading interpretation when comparing bigger states with smaller ones. Comparison on growth rates paints a more objective picture of state-level performance.

To ensure cross-indicator comparison, the identified indicators were normalized with the minimum and maximum value normalized to 0 and 1, respectively, and the rest between these two. Importantly, the normalization of data was not at the national level but at the regional level. In other words, the maximum and minimum values were based on the lowest and highest value for each indicator within the data set of the states in that region. The normalized data under each bucket was then averaged with equal weights to arrive at an index for each bucket, thereby giving six sub-indices. These sub-indices were then assigned different weights to arrive at the overall composite index.

The composite index gives a comparative picture of how the different states have fared within a particular region not only at an overall level but also at a more granular level. Thus, by studying the overall index and the sub-indices, the states can identify their essential drivers and restraints in attracting the interest of the industry. Accordingly, they can either build a holistic plan to improve their overall image or a focused plan of action to improve their areas of weakness or both. Frost & Sullivan can help such aspiring states to come up with successful plans in their race for accelerated growth and higher investments.

The study was undertaken by the Innovation and Knowledge Center (IKC) which is the fundamental research hub of Frost & Sullivan’s consulting and strategy consulting business in the Middle East, North Africa, and South Asia. It consolidates all forms of research including technical, application-related, economic, financial, and market under a single umbrella. In addition to creating comparative studies for states such as the attractiveness index, the economic research arm of IKC has a portfolio of products which can aid a market player to understand the impact of various macroeconomic forces and make the best of them in a business environment. Some of these enablers are country profiles, multi-country comparative studies, PESTLE analysis, impact analysis of global economic and political developments, investment trackers, and economic pulse monitors.

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