India climbs to 5th in global digital economy rankings, 4th in AI: SIDE Report 2026

NEW DELHI: India’s digital story just got a notable upgrade. The country has climbed three places to become the world’s fifth most digitalised economy while securing the fourth spot globally in artificial intelligence performance, according to the latest State of India’s Digital Economy (SIDE) 2026 report.

Released by the ICRIER-Prosus Centre for Internet and Digital Economy, the study ranked India fifth on the CHIPS-Combined Index, up from eighth place in 2025. Only the United States, China, Singapore and the United Kingdom placed ahead of India.

The CHIPS framework evaluates 71 economies across five pillars: connectivity, harnessing digital technologies, innovation, protection and sustainability. Together, the countries covered account for roughly 96 per cent of global GDP.

India’s rise was powered by rapid digital adoption, expanding connectivity and a growing artificial intelligence ecosystem. The report also placed India fourth on a standalone AI index, ahead of several advanced economies including Germany, France, Japan, Canada and South Korea.

One of the report’s standout findings is India’s growing influence in the global AI landscape. The country now has the world’s second-largest AI talent pool after the United States and generated an estimated USD 328 billion in digitally delivered trade. The report also highlighted India’s strength in software exports, IT services and cloud-based digital solutions.

The study pointed to a broader shift in the global technology ecosystem. According to the report, 72 per cent of AI users are now located in developing countries, with India and China together accounting for nearly two-fifths of global AI adoption. This rapid uptake has helped make generative AI one of the fastest-spreading technologies in history.

The report further noted that the global digital economy is increasingly centred around the Indo-Pacific region. Three of the world’s top five digital economies, China, Singapore and India, are now based in the region, reflecting what researchers described as an emerging “tripolar” digital order alongside North America and Europe.

However, beneath the strong rankings lies a challenge that could shape India’s next phase of growth.

While India accounts for an estimated 26 per cent of global AI users, it attracts just 1 per cent of global private AI investment, highlighting a significant gap between adoption and capital formation. The report warned that this imbalance could constrain India’s ability to translate digital scale into long-term technological leadership.

ICRIER chairperson Pramod Bhasin said the foundations for future growth are already in place.

“India has built strong foundations through connectivity, entrepreneurship and digital public infrastructure. The next phase of growth depends on how effectively we leverage AI, deepen innovation capabilities and strengthen digital trust,” said Pramod Bhasin.

Echoing that view, ICRIER distinguished visiting professor Deepak Mishra said the country must now focus on turning digital scale into innovation-led growth.

“India has transitioned from digital adopter to digital leader. Translating scale into sustained innovation and productivity gains will require stronger institutions, increased investment in research ecosystems and forward-looking policy preparedness,” said Deepak Mishra.

The report identified several structural hurdles that still need attention, including limited compute infrastructure, relatively low levels of venture and risk capital, weak industry-academia collaboration and cybersecurity spending that remains modest compared with the size of India’s digital economy.

As artificial intelligence becomes central to economic competitiveness, the report argues that India’s next challenge is no longer adoption but execution. The country has established itself among the world’s digital frontrunners. The task now is to ensure that investment, innovation and infrastructure keep pace with its growing ambitions.