These states could invite investments from both overseas and domestic players in sectors such as mining, iron and steel, power, oil and gas, pharmaceuticals, electronics, organic food, food processing industry, IT and infrastructure, Assocham said.
"The chamber evaluation was based on enquiries that it has been receiving from prospective investors about the prospects of future investments in smaller states for last six months," M K Sanghi, chamber president said.
There are cheaper rates for land acquisition, availability of larger opportunity cost in terms of 10 to 15 years tax holiday scheme, exemptions relating to state levies, easier accessibility to the political system and lesser bureaucratic hassles in smaller states, the release said.
The smaller states are competing to attract investments among one another and have fine-tuned their economic policies and administrative systems to suit requirements of investors, the chamber said.
On the contrary, the cost of setting up manufacturing bases in investment-friendly states of Gujarat, Maharashtra, Kerala, Karnataka, Tamil Nadu and Punjab are much higher, it added.