In comparison, China, already more competitive than India, has moved up one position to become the world's 34^th most competitive nation on the annual list, which is led by the US for fourth year in a row.

However, WEF has ranked India ahead of China on an accompanying list of 'Business Competitive Index', published for the first time. India has been placed at 31st rank, as against 57th for China on this list.

The US has been followed by Switzerland, Denmark, Sweden and Germany at the top of the Global Competitiveness list. Other countries in the top-ten are Finland (6th), Singapore (7th), Japan (8th), the UK (9th) and the Netherlands (10th).

"China and India continue to lead the way among large developing economies," WEF said in a statement. Among individual categories, India has been ranked at 3^rd position for market size, 26th for innovation and business sophistication factors, 31st for efficiency enhancers and 74^th for basic requirements.

It is 48th for institutions, 67th for infrastructure, 108th for macroeconomic stability, 101st for health and primary education, 55th for higher education and training, 36th for goods market efficiency, 96th for labour market efficiency, 37th for financial market sophistication and 62^nd for technological readiness.

The GCI list includes 131 countries, while the BCI list has 127 nations. The BCI list is based on more detailed examination of the microeconomic aspects of competitiveness.

The BCI list is also led by the US, followed by Germany, Finland, Sweden, Denmark, Switzerland, Netherlands, Austria and Japan on the top ten.

"The efficiency of the country's markets, sophistication of its business community, the impressive capacity for technological innovation that exists within a first-rate system of universities and research centres, all contribute to making the United States a highly competitive economy," WEF said.

"However, some weaknesses, particularly related to macroeconomic imbalances, continue to present a risk to the country's overall competitiveness potential, and to the global economy as a whole.

"This danger has most recently been demonstrated by the fallout and contagion caused by the country's sub-prime mortgage crisis and the ensuing global credit crunch," said Xavier Sala-i-Martin, Professor of Economics at Columbia University and co-editor of the report.

The rankings are based on both publicly available data and an Executive Opinion Survey, a comprehensive annual survey conducted by the WEF together with its network of partner institutes (leading research institutes and business organisations) in the countries covered by the report.

Top 10 most competitive nations

1. United States
2. Switzerland
3. Denmark
4. Sweden
5. Germany
6. Finland
7. Singapore
8. Japan
9. United Kingdom
10. Netherland