India has been undertaking significant liberalisation initiatives since 1991 with a
view to improving the efficiency of manufacturing industries and achieving faster GDP
growth. The effects of national level policies can differ considerably across the Indian
states, depending upon the nature of various institutional factors and policies in the states,
which can be classified under the broad heading ‘investment climate’ (IC). The present
paper investigates the influence of IC on the levels of total factor productivity (TFP) in the
organised manufacturing sector across the major Indian states