India was ranked 118th in the list, down one slot from last year on the index. The report takes into account the GDP per capita, life expectancy, social support, and freedom to make life choices as indicators of happiness.
Switzerland was ranked second on the list, followed by Iceland (3), Norway (4) and Finland (5).
The report said that India was among the group of 10 countries witnessing the biggest happiness declines, along with Venezuela, Saudi Arabia, Egypt, Yemen, and Botswana.
India comes below Somalia (76), China (83), Pakistan (92), Iran (105), Palestinian Territories (108) and Bangladesh (110).
The US is ranked 13th, coming behind Australia (9) and Israel (11).
Inequality, a key parameter
The report, released ahead of the UN World Happiness Day on 20 March, for the first time gives a special role to the measurement and consequences of inequality in the distribution of well-being among countries and regions.
"People are happier living in societies where there is less inequality of happiness. They also find that happiness inequality has increased significantly (comparing 2012-2015 to 2005-2011) in most countries, in almost all global regions, and for the population of the world as a whole," the report said.