Results: Discussion on Weights

The final EEI score is the aggregated score of seven sub-indices using the weights assigned by PCA. In order to understand the driving factors behind the final score it is important to keep in mind the weights assigned to different components of Economic Environment Index. As evident from pie chart, the sub indices - Physical Infrastructure, Business Establishment Cost and Cost of Doing Business - assume relatively higher weights than the rest of the sub indices. PCA has been used to determine these weights, both for variables within each sub index and for the sub indices themselves. As explained in the earlier section, the PCA is a widely used technique to assign weights based on the characteristics of the data itself.

It assigns higher weights to those sub indices which exhibit greater variability across the districts. Thus, a higher weight to Physical Infrastructure, Business Establishment Cost and Cost of Doing Business is due to the fact that the variation for these sub-indices is relatively higher than the variation other sub indices.

A look at the weights

Physical Infrastructure, Business Establishment Cost and Cost of Doing business together account for more than 50 per cent of total weight making the other four sub indices Social Infrastructure, Governance, Law and Order and Environmental Sustainability relatively less important in determining the final EEI Score. Clearly, any marginal improvement in the first three sub-indices would lead to higher increase in the final EEI score than similar improvement in any of the last four sub-indices.