Switzerland tops the list of 137 countries, followed by the US and Singapore at second and third places.
India has been ranked as the 40th most competitive economy on the World Economic Forum's (WEF's) global competitiveness index.
It has slipped one place from last year's ranking of 39.
Switzerland topped the list of 137 countries, followed by the US and Singapore at second and third places. China is ranked at 27th.
As per the report, the score has improved across most pillars of competitiveness.
"India stabilises this year after its big leap forward of the previous two years," the report said.
In South Asia, India has wrested the highest ranking, followed by Bhutan (85th rank), Sri Lanka (86), Nepal (88), Bangladesh (99) and Pakistan (115).
The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.