The report said that out of the 21 states, Bihar, Uttar Pradesh and Jharkhand will have to do a significant amount of catching up.
Gujarat has topped the list of 21 states with most investment potential that has been drawn up by economic think-tank NCAER.
Gujarat is followed by Delhi, Tamil Nadu, Andhra Pradesh and Maharashtra.
The ranking of 20 states and one union territory of Delhi was based on five pillars -- labour, infrastructure, economic climate, governance and political stability, perceptions -- and 51 sub-indicators.
While Gujarat topped in governance and political stability, and perceptions, Delhi ranked one in infrastructure and economic climate. Kerala topped the chart in labour issues.
The report said that out of the 21 states, Bihar, Uttar Pradesh and Jharkhand will have to do a significant amount of catching up.
NCAER's senior fellow Indira Iyer said this report is different from the World Bank's report, which was released last year, though it complements that ranking.
While the World Bank-DIPP report was more about procedures and transactions, the NCAER report focuses on policy and structural backdrop that determines the business environment in a state.
Talking about this NCAER's index, DIPP secretary Ramesh Abhishek said the results are quite different from World Bank's report.
"In the beginning it was of some concern to us before we got down to the details of what this study is all about because we thought it may send some diverse messages to various potential investors but the two studies and the contents are so different that they supplement each other nicely," he said.
Talking about specifics, he said the report has cited corruption, delay in getting approvals before starting a business and hurdles in getting environmental clearance as top three constraints.
"These are the areas DIPP wishes to address as part of our ease of doing business initiatives," he added. The secretary suggested the states come out with ideas and measures to improve on these three issues.
The survey has covered only 21 states -- Assam was the only one among the seven north-eastern states. Goa, Jammu & Kashmir and Sikkim were not taken into account.
Further, Iyer said states need to focus on e-governance, ease of doing business and improving skilled manpower to attract investors.
The objective of the survey was to get the industries' perception on issues related to land, labour and infrastructure and governance; business climate in their respective states and various other challenges faced by industrialists.
