A new index ranking countries according to the economic freedom they offer their citizens, brings good and bad news for India.

The good news: In the year through June 2013, India notched up its highest economic freedom score in the 20 years since the list was first compiled. The country scored 55.7 out of a possible 100 points for the freedom it provides individuals to work, produce, consume and invest.

The bad news: India slipped down a position to 120 out of the 178 countries ranked in the report- one position behind debt-ridden Greece. In the year through June 2012, India ranked 119.

According to the “2014 Index of Economic Freedom”, published by the Heritage Foundation, a U.S. –based think tank, in partnership with The Wall Street Journal, India continues to underperform partly because of policies adopted by New Delhi.

“The government’s presence in the economy remains extensive through state-owned enterprises and wasteful subsidy programs that result in chronically high budget deficits,” the report’s authors said. Tedious regulatory processes and red tape “hamper private-sector development and modernization of the economic base,” they added.

The report evaluates countries based on a range of parameters including their fiscal health, the size of government, and regulatory efficiency. Hong Kong topped the list for second straight year followed by Singapore.

Economic freedom is achieved by minimum government intervention in labor, capital and goods in the market, according to the report.

The index classifies India as a “mostly unfree” economy despite modest signs of improvement. India’s current account deficit, although high, shrank to $5.2 billion – the lowest in four years in the last quarter of 2013. Industrial output in the country, however, fell for the second-straight month in November.