The past decade has been defined by the rapid diffusion of advanced technologies reshaping production systems and global value chains. As economies become more technology-intensive and integrated into these value chains, competitive advantage rests less on factor endowments and more on knowledge, skills, and adaptability. Skills are no longer a peripheral social policy concern, they sit at the centre of structural transformation and long-term productivity growth.

This transformation is unlikely to be uniform across a country as large and diverse as India. States differ sharply in industrial structure, institutional capacity, education systems, and labour market composition, and economic upgrading tends to be path-dependent: regions diversify into activities close to their existing capabilities. Understanding how knowledge-intensive employment is distributed across states is therefore central to diagnosing India’s long-run competitiveness and its capacity to move into higher-value activities. Yet conventional measures of skill (education levels or years of schooling) do not map neatly onto this task; they lack the granularity to capture the knowledge-intensive occupations that define the twenty-first century economy.

It is in this light that this year’s thematic chapter of ACI’s Indian Sub-national Competitiveness Analysis moves India’s skills discourse beyond conventional measures of educational attainment. Drawing on a harmonised occupation–knowledge matrix, the authors map U.S. O*NET knowledge categories to Indian Periodic Labour Force Survey (PLFS) data. The chapter then evaluates how knowledge-intensive employment is distributed across states, how these patterns have evolved over time, and how they align with India’s high-growth industrial priorities.

At the national level, four findings stand out. First, knowledge-intensive employment is geographically concentrated. Across ten major knowledge domains, top positions are consistently held by Tamil Nadu, Maharashtra, Haryana, Kerala, and Delhi, with Southern and Western states appearing most frequently among the leaders. Second, competitiveness patterns differ by metric. Raw employment counts favour larger states such as Maharashtra and Uttar Pradesh, while location quotients reveal relative specialisation that sometimes elevates smaller states or Union Territories with concentrated knowledge niches. Third, the distribution of knowledge is domain-specific rather than uniform: Kerala leads in Health Services and Business and Management; Tamil Nadu and Gujarat lead in Manufacturing and Production and Engineering and Technology; Haryana leads in Education and Training, Law and Public Safety, and Mathematics and Science; and Delhi leads in Communications and formal-service knowledge groups. Fourth, the analysis also traces catch-up patterns over time. Gujarat and Punjab show marked improvements in Manufacturing and Production, while Haryana also improves across Education and Training, Health Services, and Mathematics and Science between 2017 and 2023.

Linking these knowledge-intensive employment distributions to the seven high-growth industries identified in prior policy analyses, the chapter finds strengths and weaknesses are concentrated in specific states. Delhi, Maharashtra, Kerala, and Tamil Nadu rank in the top tier across multiple critical knowledge categories, positioning them to broadly support high-growth industries. Uttar Pradesh, Madhya Pradesh, Odisha, and Bihar rank lower across several critical knowledge categories, pointing to scope for capability enhancement. At a more granular level, Telangana, Karnataka, Tamil Nadu, and Maharashtra lead in Computers and Electronics; Goa, Tamil Nadu, and Maharashtra in Engineering and Technology; Gujarat, Tamil Nadu, Kerala, and Goa in Mechanical knowledge; and Delhi, Kerala, Tamil Nadu, and Puducherry in Production and Processing.

This volume also presents the latest results of the ACI India Annual Competitiveness Analysis of the 36 sub-national economies and five regions of India. Performance is judged based on aggregation across four sub-indices: Macroeconomic Stability, Government and Institutional Setting, Financial, Business, and Manpower Conditions, and Quality of Life and Infrastructure Development.

1. From an overall standpoint, Maharashtra continues to be India’s most competitive sub-national economy, followed by Gujarat, Delhi, Uttar Pradesh, and Karnataka. Assam proves to be the least competitive sub-national economy.

2. At the environment level, the top performing sub-national economies’ overall competitiveness is driven by strengths in Macroeconomic Stability, Government and Institutional Setting, and Financial, Business, and Manpower Conditions, but trails behind in Quality of Life and Infrastructure Development.

3. From a regional lens, the Western region continues to be the most competitive. The Northern region emerges as second-most competitive, closely followed by the Southern region. The North-eastern region retains its fourth position, ahead of the Eastern region, which ranks last.

4. The Western region leads due to its strong performance in the Macroeconomic Stability and Financial, Business, and Manpower Conditions environments. The Northern region leads in the Government and Institutional Setting environment. The Southern region performs well due to its relatively strong performance across all four environments.

5. Despite being laggard in the overall rankings, the North-eastern region leads in the Quality of Life and Infrastructure Development environments. However, this strength fails to overcome its weak performance in other environments. The Eastern region holds a weaker comparative performance across all environments.

By Parag, DASS