India continues to be the most attractive destination for offshoring of services such as information technology, business processes and call centres, a global management consulting firm has said.

It remains the best offshore destination by a wide margin even if wage inflation and the mergence of lower-cost countries decreased its overall lead, the annual ranking by consulting firm A T Kearney has said.

The report, however, cautioned that the Indian lead has shrunk slightly compared with that of last year. This was due to a slight reduction in India's financial attractiveness, the result of wage inflation in India and the emergence of new even lower-cost contenders in Africa and South East Asia like Ghana and Vietnam.

Outsourcing and India: Complete Coverage

As far as China is concerned improved infrastructure and relevant people skills have increased its attractiveness as a low-cost option for servicing Asian markets. The gap between India and the second-ranked country China is larger than the gap between the next nine countries combined.

A surprising finding in its annual rating is that the US emerged as the 11th among the 40 countries evaluated.

The firm said it had added four lower cost cities in the United States, Britain, Germany and France to determine how they compare with the more traditional offshore locations.

The survey gives wage inflation and emergence of even lower-cost contenders such as Ghana and Vietnam for the slight reduction in India's financial attractiveness.

The report said that infrastructure and improving skills of the people have increased the attractiveness of China's low-cost option for servicing Asian markets.

Thailand jumped from 13th to 6th in this year's Index and Southeast Asian countries now make up four of the top six locations on the Index.

Offshore attractiveness in Europe continues to migrate eastward as Bulgaria, Slovakia and Romania enter the Index for the first time.

As a region, Southeast Asia is the biggest winner in this year's Index. Malaysia maintains its 3rd position Singapore stays at 5th, the Philippines rises from 6th to 4th, Thailand jumps from 13th to 6th, and Indonesia leaps into the Index at 13th.

Even Vietnam, at 26th in this year's Index, sees its ranking rise from 20th to 16th position among the original 25 countries included in both the 2004 and 2005 Indices.

In Malaysia and Singapore, government promotion policies continue to pay off, the report said, adding that Given its high-wage levels, Singapore has deliberately positioned itself as a safe location for sensitive high-end activities, with a particular emphasis on business continuity, IP protection and data privacy.

Malaysia has augmented continued investment in world-class infrastructure along the Multimedia Super-Corridor, with further incentives for corporations choosing to locate in Malaysia and additional policies to open up the labour pool and deepen English language and technical skills throughout the population.

The Philippines, despite continuing political instability and infrastructure weaknesses, continues to benefit from the global exposure and English language skills of its workforce.