28/01/2015 3:51 PM IST | Updated 15/07/2016 8:24 AM IST

India Ranked World's 128th Freest Economy

PHILIPPE LOPEZ via Getty Images
People walk on Victoria harbor waterfront in Hong Kong on January 28, 2015. According to local reports citing the US think tank Heritage Foundation, Hong Kong has been ranked the worlds freest economy for the 21st year in a row but is weighed down by perceived corruption and eroding public trust. AFP PHOTO / Philippe Lopez (Photo credit should read PHILIPPE LOPEZ/AFP/Getty Images)

WASHINGTON -- India has been ranked the 128th freest economy in the world in a report by The Heritage Foundation, a conservative Washington think tank. This embarrassing score is worse than last year's ranking.

With a score of 54.6 out of 100, India slipped 1.1 points from last year in the 2015 Index of Economic Freedom that evaluates economic conditions and governments policies towards business and entrepreneurship. A total of 186 countries have been ranked in the report, in collaboration with The Wall Street Journal. In the Asia-Pacific region, India ranks 26th, way below Hong Kong and Singapore, which got the top two ranks. The United States is at the 12th position.

The report said India has made modest improvements in business freedom, property rights, and freedom from corruption. But those minor gains were offset by declines in labor freedom and trade freedom. Because of this plunging score, India has been classified as a "mostly unfree" economy.

India's level of economic freedom is unchanged over five years, the report notes. The state's presence in the economy remains extensive through state-owned enterprises and wasteful subsidy programs that cause chronically high budget deficits.

"In the absence of a well-functioning legal and regulatory framework, a weak rule of law exacerbated by corruption in many areas of economic activity undermines the emergence of a more vibrant private sector," it said.

The reform-minded administration of Prime Minister Narendra Modi, the Index notes "has undertaken some necessary structural adjustments with a focus on reforming the inefficient and bloated government sector, better managing public finance, and improving the business and investment environments."

The first budget presented in July 2014, however, was short on detail about plans to restructure wasteful subsidy programs and reignite economic growth, it said.

Corruption, poor infrastructure, and fiscal deficits are major obstacles to economic growth, the report said. In a poll, 96 percent of Indians said chronic corruption was holding back their country. Corruption has had a negative effect on government efficiency and economic performance.

According to the Index, the US continues to be only the 12th-freest economy, seemingly stuck in the ranks of the "mostly free," trailing such comparable economies as Australia, New Zealand and Switzerland.

The global average economic freedom score has advanced to its highest level ever of 60.4 (on a 0-to-100 scale) in the 2015 Index.