The US is now ranked seventh in the body's league table measuring the impact of technology on the development of nations. A deterioration of the political and regulatory environment in the US prompted the fall, the report said.

Countries were judged on the integration of technology in business, the infrastructure available, government policy favourable for fostering a culture of innovation and progress and leadership in promoting the usage of the latest information technology tools.

Despite losing its top position, the US still maintained a strong focus on innovation, driven by one of the world's best tertiary education systems and its high degree of co-operation with industry, the report said.

NETWORKED READINESS INDEX RANKINGS 2006 (2005)
1: Denmark (3)
2: Sweden (8)
3: Singapore (2)
4: Finland (5)
5: Switzerland (9)
6: Netherlands (12)
7: US (1)
8: Iceland (4)
9: UK (10)
10: Norway (13)

Germany (16), Austria (17) and Estonia (20)

While countries from Asia and the Pacific continued to progress, the powerhouse economies of China and India both showed a downward trend. India was four positions down on last year to 44th, suffering from weak infrastructure and a very low level of individual usage of personal computers and the internet. China was knocked to 59th place, nine positions down, with information technology uptake in Chinese firms lagging.