The ranking was based on factors such as availability of market information, reforms in urban local bodies, progressive business environment, protection of property rights and inclusive and sustainable development.
Tamil Nadu also ranked second in inclusive and sustainable development, reforms in urban local bodies and availability of market information and third in protection of property rights. However, it came only ninth in the progressive business environment category.
Neighboring Andhra Pradesh, which is ranked first, overall, is way ahead of Tamil Nadu on progressive business environment, according to the Index.
"Tamil Nadu rates highly on market information, urban reforms and property rights. In the report, Economic Freedom of States of India published by Academic Foundation, the state ranked high on legal structure and security as well as regulation of labour and business, due to its good governance," the study said.
Real estate services related to land records and registration and water supply services are perceived as being corrupt in Tamil Nadu, as per the India Corruption Study 2008 by Transparency International India. However, these problems are likely to be alleviated in the long run as all reforms related to computerisation of land records have been initiated and are in progress, the study said.