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Tendulkar has been chosen at number four batting position along with legends like Don Bradman, Vivian Richards, Garry Sobers and Shane Warne.
Others in the World XI, dominated by Australians and West Indians, were Jack Hobbs, Len Hutton, Adam Gilchrist, Malcolm Marshall, Wasim Akram and Dennis Lillee.
Gavaskar and Lara found themselves in the second World XI along with Barry Richards, George Headley, Wally Hammond, Imran Khan, Alan Knott, Bill O'Reilly, Fred Trueman, Muttiah Muralitharan and SF Barnes.
Ponting was not in any of the two teams, the same as McGrath and India's world Cup winning captain Kapil Dev.
The jury comprised one former captain from each of the top Test-playing teams -- Ian Chappell, Clive Lloyd, Tony Greig, Duleep Mendis, Ali Bacher, Intikhab Alam, John Wright, Ajit Wadekar -- and four cricket historians and writers.
Warne, Gilchrist and Akram were the other players from the last two decades to make it to the XI, which featured seven players who made their debuts after 1970.
Four Australians, three West Indians, two Englishmen, an Indian and a Pakistani make up the XI.
Three players were unanimous choices, figuring in the first XIs of each of the 12 members of the jury (each juror was asked to pick a first XI and a second) -- Don Bradman, Garry Sobers and Shane Warne, each of whom got the maximum points possible in the exercise, 60. Tendulkar followed with 51 points.
The biggest surprise the XI threw up was the gap between Warne and Muralitharan, the two leading wicket-takers in cricket history. Muralitharan made it to the World Second XI, tallying 34 points fewer than Warne.
The closest battles were for one of the opening spots and for number five. Gavaskar lost out to Hobbs by one point and Headley by two to Richards.
Hutton (47 points) partners Hobbs at the top. They are followed by Bradman, Tendulkar, Richards and Sobers. While there was no competition to Sobers for the all-rounder's spot, Imran (19) narrowly edged out Keith Miller to make it to the Second XI.
Gilchrist beat Alan Knott to the wicket-keeper's spot by eight points. The next closest contender was Kumar Sangakkara, who got nine points.
The bowling positions were all decided by handsome margins. Three of cricket's most highly rated fast bowlers -- Dennis Lillee, leading with 48 points, Wasim Akram and Malcolm Marshall (in addition to Sobers, who could bowl left-arm fast, spin and chinamen) -- accompany Warne.
Tendulkar, Bradman, Sobers, Gilchrist, Warne and Akram were voted by the ESPNcricinfo readers in their XI which also have Virender Sehwag, McGrath and Gavasakar.
Sehwag and Gavaskar were the overwhelming favourites for the opening slots, while Lara edged out Richards for a place in the middle order.
The readers went with a two-spin, two-quicks bowling combination. Their XI has Warne and Murali bowling in tandem.
McGrath and Akram comfortably beat competition from all the West Indian bowlers in the shortlist.
The World XI: Jack Hobbs, Len Hutton, Don Bradman, Sachin Tendulkar, Viv Richards, Garry Sobers, Adam Gilchrist, Malcolm Marshall, Shane Warne, Wasim Akram, Dennis Lillee.
The Second XI: Sunil Gavaskar, Barry Richards, George Headley, Brian Lara, Wally Hammond, Imran Khan, Alan Knott, Bill O'Reilly, Fred Trueman, Muttiah Muralitharan, SF Barnes
Readers' XI: Sunil Gavaskar, Virender Sehwag, Don Bradman, Sachin Tendulkar, Brian Lara, Garry Sobers, Adam Gilchrist, Shane Warne, Wasim Akram, Muttiah Muralitharan, Glenn McGrath.