Patna: Bihar has been categorised as an ‘Emerging Performer’ in NITI Aayog’s Investment Friendliness Index 2026, reflecting progress in education, infrastructure and public services while underscoring long-standing structural challenges that continue to limit private investment.
The report awarded Bihar 41.2 out of 100 points, placing it in the Emerging Performer category alongside Jharkhand, Punjab, West Bengal, Jammu and Kashmir, Meghalaya, Nagaland and Puducherry. However, the state ranked 26th among India’s 36 states and Union Territories and 17th among the large states, indicating considerable room for improvement.
What The NITI Aayog Report Says
The Investment Friendliness Index assesses states on factors that influence investment decisions, combining government data with feedback from more than 1,850 investors.
According to the report, Bihar has strengthened several areas that are considered important for attracting investment, particularly education, physical infrastructure and access to basic utilities. At the same time, investors identified weaknesses in industrial development, governance and the wider business ecosystem that continue to affect confidence.
Education And Infrastructure Emerge As Bihar’s Strongest Areas
Among Bihar’s strongest indicators is public investment in education. The report states that the state’s expenditure on education is 46 per cent higher than the average for large states, suggesting a sustained focus on human capital.
Transport infrastructure also received positive assessments. According to the report, Bihar has improved its road and railway connectivity, while cold storage capacity is 23 per cent higher than the average among large states, potentially strengthening the state’s agricultural supply chain.
The report also points to improvements in electricity and water supply compared with previous years. Investors surveyed by NITI Aayog said the environmental clearance process has become easier, reducing one of the administrative hurdles for businesses.
Why Bihar Continues To Trail Other States
Despite these improvements, the report identifies Bihar’s business environment as its weakest area.
According to NITI Aayog, the state continues to lag behind most large states in the development of an industrial ecosystem, innovation capacity, industrial land availability, digital infrastructure and law and order. These shortcomings, the report suggests, remain key reasons why large investors are reluctant to establish operations in Bihar.
The report also notes the absence of dedicated industrial parks, inadequate air connectivity for Tier-2 and Tier-3 cities, limited access to uninterrupted industrial power supply and a complex land allocation process as factors affecting investment decisions.
Per Capita Income Remains Well Below The National Average
The report highlights Bihar’s broader economic challenges alongside its investment potential.
According to NITI Aayog, Bihar’s per capita Gross State Domestic Product (GSDP) stands at Rs 44,705, around 72 per cent lower than the average for large states.
The state’s economy remains heavily dependent on services, which account for 67.5 per cent of GSDP. Industry contributes 22.1 per cent, while agriculture accounts for 10.4 per cent.
Foreign Investment Continues To Be Limited
NITI Aayog’s analysis shows that Bihar attracted Foreign Direct Investment (FDI) worth only USD 0.16 million during 2023–24, one of the lowest levels among Indian states.
The report identifies food processing and the manufacture of coke and refined petroleum products as Bihar’s principal industrial sectors. It adds that the state has considerable potential for agro-based industries but will need a more competitive industrial environment to attract larger domestic and foreign investments.
Financial And Industrial Indicators Raise Concerns
The report also flags concerns about Bihar’s fiscal position.
According to NITI Aayog, the state’s outstanding liabilities are around 500 basis points higher than the national average, indicating the need for stronger fiscal management.
Industrial financing remains another area of concern. Bank credit to industry accounts for only 6.7 per cent of Bihar’s GSDP, which the report says is insufficient to support faster industrial growth.
Innovation indicators also remain weak. Patent applications account for just 0.48 per cent of active companies, compared with an average of 3.6 per cent among large states. Bihar also ranks 32nd in the share of micro, small and medium enterprises (MSMEs), reflecting a relatively underdeveloped entrepreneurial ecosystem.
What Investors Want To See Next
Investor feedback collected for the index suggests that recent improvements in infrastructure and administrative processes have been recognised.
However, respondents also called for uninterrupted 24-hour electricity for industries, improved law and order, faster land allocation procedures, stronger digital connectivity and policies that encourage industrial investment.
According to the report, addressing these structural issues will be essential if Bihar is to convert its improving infrastructure and educational strengths into sustained private investment and employment growth in the coming years.
