India ranks a low 134 among 187 countries in terms of the human development index (HDI), which assesses long-term progress in health, education and income indicators, said a UN report released on Wednesday.
Although placed in the "medium" category, India's standing is way behind scores of economically less developed countries, including war-torn Iraq as well as the Philippines.
India's ranking in 2010 was 119 out of 169 countries.
Sri Lanka has been ranked 97, China 101 and the Maldives 109. Bhutan, otherwise respected for its qulity of life, has been placed at 141, behind India.
Pakistan and Bangladesh are ranked 145 and 146 in the list of countries that is headed by Norway and in which the Democratic Republic of Congo is at the very bottom.
The other two countries in South Asia, Nepal and Afghanistan, occupy ranks 157 and 172.
According to the "UN Human Development Report 2011: Sustainability and Inequality", India's HDI is 0.5 compared to 0.3 in 2010.
Rural Development Minister Jairam Ramesh said year-on-year comparisons were not practical. "Any change in development indicators should be measured over a longer period of time," he said.
UN official Seeta Prabhu said: "The HDI for 2011 would be the same if the 2010 methodology was adopted and the sample size was the same. As many as 18 new countries were included in the survey this time."
She said India's gender inequality index was 0.6, the highest in South Asia.
But stating that India had made "significant progress" on HDI, UNDP Country Director Caitlin Wiesen said: "This trajectory may be threatened by environmental risks and inequality."
The UN report said that India had the world's largest number of multidimensionally poor, more than half of the population, at 612 million.
However, the report appreciated India's progress in improving forest cover and protecting biodiversity.
"India is one of the seven developing countries like Bhutan, China, Costa Rica, Chile, El Salvador and Vietnam which have recently transitioned from deforesting to reforesting," said the report.
India increased its reforestation rate from 0.2% a year between 1990 and 2000 to 0.5% percent a year between 2000 and 2010.
"We need to link environmental issues with the livelihoods of deprived sections," said Ramesh while releasing the report.