Despite the second highest growth in the world among major economies in 2009, India ranks 77 in Forbes Best Countries for Business list even as the US dropped from No. 2 to No. 9.

'India is developing into an open-market economy, yet traces of its past autarkic policies remain,' noted the US business magazine placing India ahead of Sri Lanka (83), China (90) and Pakistan (92) in its fifth annual ranking of 128 economies.

'Economic liberalisation, including reduced controls on foreign trade and investment, began in the early 1990s and has served to accelerate the country's growth, which has averaged more than 7 percent per year since 1997,' it said.

Capitalising on its large educated English-speaking population, India has to become a major exporter of information technology services and software workers, Forbes noted.

'An industrial slowdown early in 2008, followed by the global financial crisis, led annual GDP growth to slow to 6.5 percent in 2009, still the second highest growth in the world among major economies,' it said.

'The government abandoned its deficit target and allowed the deficit to reach 6.8 percent of GDP in FY10. Nevertheless, as shares of GDP, both government spending and taxation are among the lowest in the world,' Forbes noted

With the US economy teetering on the edge of a double-dip recession, business climate for entrepreneurs and investors in the US is starting to lag behind other countries', Forbes said noting its fall from No. 2 to No. 9 in its annual ranking.

Grabbing the top spot for a third straight year is Denmark. A big mover up the rankings is Hong Kong, which swapped places with the US, moving up to No. 2 from No. 9. It scored in the top three for taxes, investor protection and both trade and monetary freedom.

One of the most business-friendly environments can be found in New Zealand, ranked No. 3 (up from No. 5 last year), Forbes said.

Among the worst countries for business, Zimbabwe moved out of the bottom of the rankings this year thanks to Venezuela.

The ranking is based on 11 categories, including property rights, technology, corruption, red tape, investor protection and stock market performance.