India has emerged as the world’s fifth most digitalised economy and secured the fourth position in the global AI rankings, according to the State of India’s Digital Economy (SIDE) 2026 report released by the ICRIER-Prosus Centre for Internet and Digital Economy (IPCIDE).
The report, which benchmarked 71 countries representing 96% of global GDP, highlights India’s rapid digital transformation and its growing influence in the global AI ecosystem. India has now surpassed several developed economies, including Germany, France, Japan, the United Kingdom, and Canada, in overall digital performance.
A major finding of the report is the accelerating adoption of artificial intelligence across developing nations. Nearly 72% of global AI users are now located in developing economies, with India and China together accounting for almost two-fifths of worldwide AI adoption. The report describes generative AI as the fastest-diffusing technology in history, spreading across emerging economies almost immediately after launch.
The study also points to a significant structural shift in global digital leadership. Among the world’s top five digital economies, three — China, Singapore, and India — are now from the Indo-Pacific region, indicating the emergence of a new tripolar digital order alongside the traditional North Atlantic powers.
Speaking on the report, Pramod Bhasin, Chairperson of ICRIER, said India has built strong digital foundations through connectivity, entrepreneurship, and digital public infrastructure. He noted that the next phase of growth would depend on how effectively the country leverages artificial intelligence, strengthens innovation capabilities, and builds digital trust.
India climbed from 8th position in 2025 to 5th in 2026 in the overall digital economy rankings, showcasing accelerating momentum in an increasingly competitive global landscape. The country’s standalone AI index ranking of 4th — behind only the United States, China, and Singapore — reinforces its emergence as a major global AI powerhouse.
Dr. Deepak Mishra, Distinguished Visiting Professor at ICRIER, stated that India has transitioned from being a digital adopter to becoming a digital leader. He added that sustaining this momentum would require stronger institutions, increased investments in research ecosystems, and future-ready policy frameworks.
The report highlights that India’s digital economy is increasingly being driven by AI adoption, fintech innovation, and a rapidly evolving startup ecosystem. India has also emerged as one of the world’s largest exporters of digitally delivered services, including software, IT services, and cloud-based solutions, recording nearly USD 328 billion in digitally delivered trade despite being a lower-middle-income economy.
Sehraj Singh, Vice President, Group Corporate Affairs & Public Policy at Prosus, said India is no longer just a large digital market but is rapidly becoming one of the world’s most influential AI economies. He reaffirmed Prosus’ long-term commitment toward supporting India’s digital innovation ecosystem.
The report further noted that India possesses the world’s second-largest AI talent pool after the United States and commands nearly 26% of global AI users. However, despite its massive user base and talent concentration, India currently accounts for only around 1% of global private AI investment, underlining a significant gap in risk capital and compute infrastructure.
Experts behind the report believe India’s next phase of digital growth will depend on expanding access to advanced compute infrastructure, mobilising long-term venture capital, and strengthening collaboration between universities, startups, and industry to improve AI commercialisation pathways.
While AI adoption is spreading rapidly across countries, the report warns that frontier AI infrastructure — including advanced semiconductor chips, compute capacity, and large language models — remains concentrated among a limited number of countries and companies. India’s ability to build domestic AI capabilities while leveraging its strengths in application-layer innovation will determine its competitiveness over the next decade.
The report also cautions against the growing risks associated with rapid digitalisation. Online financial fraud and cybercrime have become some of the most commonly reported forms of crime in India, while issues related to digital exclusion and environmental sustainability are also becoming increasingly prominent. The study stresses the importance of stronger policy measures and investments to ensure safe, inclusive, and sustainable digital growth.
The SIDE 2026 report uses the enhanced CHIPS framework — Connect, Harness, Innovate, Protect, and Sustain — specifically designed to evaluate how emerging economies are navigating the AI era. The expanded framework covers countries representing 96% of global GDP, 93% of internet users, and 91% of the global population, making it one of the most comprehensive digital economy benchmarking exercises to date.
Key Highlights from the SIDE 2026 Report
- India ranked 5th globally in overall digital economy performance, improving from 8th position in 2025.
- India secured 4th place in the standalone AI Index, behind only the United States, China, and Singapore.
- Developing countries now account for 72% of global AI users.
- India recorded nearly USD 328 billion in digitally delivered trade.
- India has the world’s second-largest AI talent pool but faces gaps in AI investment and compute infrastructure.
- The global digital economy is increasingly shifting toward an Indo-Pacific-led tripolar structure.
- Cybersecurity, digital inclusion, and sustainability have emerged as critical policy priorities.
The report was jointly developed by IPCIDE, an initiative of the Indian Council for Research on International Economic Relations (ICRIER) and Prosus, aimed at shaping evidence-based policy for India’s evolving digital economy.
By: Arushi Agarwal
