Could you please also add a DEPENDENCIES file, like that found in
GNU gettext or GNU poke? It logically belongs in the INSTALL, not in
the README file, but since the INSTALL file is not in your hands
(Automake enforces that), DEPENDENCIES is a second-best location.
Then in the README file you can write "For installation, look into
the DEPENDENCIES and INSTALL files.". It does not blow up the README
I have decided against adding DEPENDENCIES. README is the commonest location for such information, and I'm only adding a few lines: I do not feel able to maintain the quantity of information I find in GNU poke's dependencies file; nor do I think that it is necessary. My primary audience for building from source is packagers, and even most users who want to build from source will be using a package manager to install build dependencies. The detailed information in GNU poke's DEPENDENCIES file will, I suspect, be redundant to most of its readers, and apt to get out of date (unless there's an automatic tool to maintain it?). Certainly, I've never myself wished for such information, or previously been asked for it.
It would be great if I could just give a command to install build dependencies, but unfortunately we're cursed/blessed with a wide variety of packaging systems and naming conventions for packages for C programs; in any case, I feel free software development should be moving towards more automation and greater brevity, and not bloating documentation, however well meant. In the current situation, search engines cover the gap pretty well.
I note that it is possible to change INSTALL; I do so in some projects using bootstrap's ability to patch gnulib-provided files.