Explanation:

The world's first prototype floating city is being developed in **South Korea**, specifically off the coast of Busan. This project, known as Oceanix City, is a collaboration between UN-Habitat, the city of Busan, and Oceanix, designed as a sustainable and flood-proof urban development. Option (A) India has various ambitious infrastructure projects, but not the world's first floating city of this scale. Option (C) Japan, an island nation, has advanced marine technology but is not currently developing the 'world's first floating city' prototype. Option (D) Israel is known for its technological innovations, particularly in water management, but is not associated with this specific floating city project. Therefore, South Korea is the country where the world's first floating city is being planned and developed.