India has dropped two places to 29th in a list of 55 most competitive economies in the world, compiled by the International Institute for Management Development, in Lausanne, Switzerland.

Both emerging economic giants, China and India, slipped two places to 17th and 29th places, respectively, in the list of 55 economies published in the `IMD World Competitiveness Yearbook 2008.'

The United States remains the world's most competitive economy, for the 15th year in a row, despite possibilities of the economy slipping into a recession, the report said.

"A recession in the US is a strong possibility," IMD professor Stephane Garelli said, noting the large size of the country's financial sector as well as high commodities and food prices could keep driving up inflation at a time of low official interest rates. "2008 will be rough," the professor added.

But, he noted the US Federal Reserve and treasury department have been quick to step in to inject liquidity into the troubled economy and its financial markets, although more may be needed to avert a bigger crisis.

Singapore has been ranked No 2, followed by Hong Kong, Switzerland and Luxembourg in the order of performance.

The ranking was based on the countries' economic performance, government efficiency, business efficiency and infrastructure.

Australia moved up five places to seventh spot, just behind Denmark, and Canada, the Netherlands, Norway, Ireland and Taiwan all gained in the ranking.

Among emerging economies, India has been rated below Singapore (2), Hong Kong (3), Taiwan (13), China (17), Malaysia (19) Estonia (23) and Chile (26), but above South Korea (31), Brazil (43), Russia (47), Mexico (50), Indonesia (51), Argentina (52) and South Africa (53).

IMD uses 331 competitiveness criteria to decide on the four basic parameters of economic performance - government efficiency, business efficiency and infrastructure.

India scores worst in infrastructure, particularly in respect to energy, broadband infrastructure, access to water, primary education, health and environment. It, however, fares relatively well in 'business efficiency' (the extent to which it encourages enterprises to innovate and be profitable), 'government efficiency' and 'economic performance' (macroeconomic fundamentals).

India is among the top five in terms of real GDP growth, resilience of the economy to economic cycles, growth in foreign investment (both inward and outward), consumption tax rate, real personal taxes, exchange rate stability, listed domestic companies, attitudes towards globalisation, image abroad, market size, mobile telephone and internet costs, science teaching in schools and availability of qualified engineers.