"India is already the most successful country among the offshore locations. It continues to score very well across all the 10 criterion," said IT consultancy firm Gartner in its latest report on offshore services.

However, the rapid growth of the business in neighboring China is posing tough competition, according to the report that also revealed the debut of eight new countries in the list of Top 30.

"Attractive cost structures in the Philippines, Vietnam and Indonesia create tough competition for India, while China remains the most prominent challenger in terms of scale," said the report.

The countries were rated on a 10-point criteria that include language, government support, labor pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy.

"Even though India's cost competitiveness is being challenged by the appreciation of its currency, it manages to compensate on the other nine criterion," said Gartner.

While Philippines came up as another attractive outsourcing hotspot, this was the first time that Bangladesh was included in the offshore rating list and it rated very good in costs.

Gartner sees foreign companies getting attracted to the Philippines' young, experienced labor pool specializing in contact centers (customer interaction center) and finance and accounting and business process outsourcing (BPO), complemented by a good command of the language and cultural compatibility with Western economies.

"Clients continue to seek a portfolio of offshore countries and with India again experiencing increasing labor costs and attrition, this is creating opportunities for other offshore locations to target the service needs of more mature Asian clients," said Ian Marriott, research vice-president (V-P) at Gartner.

India's competitiveness is also being challenged by countries like Indonesia that offer cheaper labor for IT and business process skills in the region.  According to the report, this year Indonesia improved its labor pool from "poor" to "fair" and improved costs from "very good" to " excellent".

According to Gartner, China improved its scores for "political and economic environment" from "good" to "very good", and "culture compatibility" from "fair" to "good".

Contributing to the increased rating for China is its rising global political and economic leverage, especially in the wake of the recent global economic crisis.