New Delhi, JANUARY 4 India has moved up three notches to rank 118, according to the 2005 Index of Economic Freedom, published by the Heritage Foundation and The Wall Street Journal.

The report, however, labels India as “mostly unfree” based on the index score of 3.53. Hong Kong remains the world’s freest economy but it could jeopardise its position if it goes ahead with a goods and services tax, US think-tank the Heritage Foundation said on Tuesday.

The former British colony topped the 2005 index for the 11th year running, beating Singapore into second place. The US dropped out of the top 10 for the first time since the index was launched 11 years ago, falling to 12th position from 10th last year. The Index of Economic Freedom, which has ranked 155 countries, has placed China at the 112th place, six notches up from 128 last year. China has reduced tariff barriers since joining the World Trade Organisation, cut government expenditure and privatised some companies, it said.

According to Heritage Foundation, the results of the May elections in India raised concerns that key economic reform measures could be compromised or halted because of the populist demands of coalition partners and leftist parties, and that peace dialogues with Pakistan might languish. It said that the administration of Prime Minister Manmohan Singh has closed down the disinvestment ministry, set up by the Bharatiya Janata Party, and has stalled the BJP’s proposal to change labor laws to allow companies to lay off workers without state-government permission.