Southern States score high on environment, governance
Mumbai: Maharashtra is India’s top-performing large State, followed by Gujarat, Karnataka and Telangana as per CareEdge Ratings’ composite state ranking for 2025. The first edition of the report in 2023 had ranked Tamil Nadu at the third place, while in the latest report it has fallen to the fifth place.
Western (Maharashtra and Gujarat) and Southern (Karnataka, Telangana and Tamil Nadu) states dominate the top five rankings. Fiscal, economic and financial development were the strong points for the Western states, while the Southern states performed well across the economic, financial development, environment, and governance pillars. Goa topped the rankings in Group B (North-East, Hilly & Small States) with strong score for financial development, infrastructure, social, fiscal and economic pillars.
Among the large states, Telangana took the second spot in financial development with positive performance on bank credit disbursements and Self-help group loans. Similarly, in terms of environment, Telangana took the second place and the third spot in infrastructure development. It was ranked sixth in governance, fiscal score, economic development and occupied the eighth rank on social score.
The ranking is based on seven key pillars — economic, fiscal, infrastructure, financial development, social, governance and environment, together capturing 50 indicators. The study excluded Union territories.
Maharashtra topped in financial development and performed strongly across the economic, fiscal and social pillars. While Gujarat’s performance is supported by its leading economic rank along with favourable outcomes in the fiscal and infrastructure pillars.
“Southern states such as Karnataka, Telangana, Andhra Pradesh and Tamil Nadu stood out in the environment category. Karnataka led with encouraging scores for air quality and renewable energy. Telangana performed well in terms of change in forest cover and potable water. Himachal Pradesh excelled in renewable energy, potable water and change in forest cover, leading the states in Group B,” said the report.
Rajani Sinha, Chief Economist, CareEdge Ratings said, “This is a quantitative assessment of states’ potential in terms of sustainable and equitable growth and is also a reflection of investment attractiveness of these states. The objective of this report is to present a holistic picture that encourages informed decision-making.”
However, the ratings agency said that the rankings of 2023 and 2025 are not comparable due to changes in methodology. The 2025 methodology incorporates a longer normalisation period for better comparability across time periods going forward. Furthermore, additional indicators have been added to enhance the comprehensiveness of the assessment.
Gujarat, which followed Maharashtra, topped the economic pillar on the back of a strong performance in per capita gross state domestic product (GSDP), foreign direct investment (FDI) as a percentage of GSDP, and gross fixed capital formation for industries. Karnataka and Maharashtra followed with a higher share of industry and services in gross value added and an encouraging performance in FDI. Interestingly, it was the eastern state of Odisha that led the fiscal rankings. The state has done well in terms of its revenue deficit, interest payments as a percentage of revenue, debt management, outstanding liabilities and guarantees.
Social Score---Kerala and Tamil Nadu stood out in the social assessment, driven by strong scores across most indicators. However, Kerala lagged on the unemployment front. Goa and Mizoram were the front-runners with better scores for infant mortality and multi-dimensional poverty rate outcomes. Goa also fared well in gross enrolment, while Mizoram scored better in literacy and had lower unemployment levels.
Governance---Andhra Pradesh topped the assessment of governance pillar, supported by better scores on business environment, court conviction rate, completion of court trials and strength of judges in district and subordinate courts. Madhya Pradesh follows in the second spot, aided by positive outcomes for completion of court trials and public e-service delivery. Regionally, the southern states performed strongly on the governance pillar, securing four of the top six positions. In Group B states, Uttarakhand and Himachal Pradesh topped the rankings owing to better performance in business environment, completion of court trials, strength of judges and public e-service delivery.
