New Delhi, 22 Oct. India has made tremendous progress since opening its doors to foreign investment and trade. But it still has a long way to go.

The World Prosperity Index 2008 ranked 104 countries based on their prosperity levels, degree of economic competitiveness, and comparative liveability. The index used 22 key indicators and 44 sub-indicators.

The factors that dragged India down so low in the index included the lack of government effectiveness, the cost of starting a new business, and the quality of its secondary education.

"India has a relatively entrepreneurial culture. It requires government effectiveness and the tackling of corruption," said Alan McCormick, the managing director of the Legatum Institute, which created the index.

The report, which was released last week, blamed undue bureaucracy, inadequate governance, and corruption as they impose costs on business. These extra business costs restrict growth.

In the first broad categories, economic competiveness, India’s best score was in its avoidance of dependence on foreign aid. In this measurement, it ranked higher than Israel (19), Slovenia, and the Czech Republic (tied at 23).

Its worst economic competitiveness ranking was in the ability to commercialize ideas via entrepreneurship. It ranked worse than Zambia (102), Tanzania (100), and Kenya (96). However, this entrepreneurship commercialization ranking was above Austria’s (2) and Canada’s (14).

In the comparative livability section, India excelled in the unemployment rating, beating Austria, Finland (tied at 2) and Germany (4). At the bottom of the list, Nepal (98), Mozambique (96), and Sudan (94) surpassed India in the unemployment rating.

The study placed India at number 10 on its “Who's Going Places” listing, with China at number six. McCormick said, "These countries have the best context right now within which to create wealth." India recently forecast growth figures of around 7.7% and China at 9%, and with in excess of two billion people this is no surprise.

"India outstrips many South Asian nations in various aspects of wealth creation. It ranks stronger with reference to other Asian countries in terms of avoiding dependence on commodity exports and foreign aid," McCormick added.

The Senior Vice President of the Legatum Institute, Dr. William Inboden added, "True prosperity consists of more than money. It also includes happiness, health, and liberty.”

Economists have long struggled to measure these subjective characteristics to quantify quality of life, which this study seeks to do. The study can be viewed at www.prosperity.com.

Charles Cole, EconomyWatch.com