India has emerged as the 5th most digitalised economy globally says the State of India's Digital Economy (SIDE) 2026 report released on Friday by the ICRIER-Prosus Centre for Internet and Digital Economy (IPCIDE).

The report documents a fundamental shift in the global digital landscape: 72% of AI users are now in developing countries, with India and China together accounting for nearly two-fifths of worldwide AI adoption. Generative AI has diffused faster than any previous technology in history, becoming a developing-country phenomenon almost immediately after launch.

The findings also reveal a 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, signalling the emergence of a tripolar digital order alongside the traditional North Atlantic pole. 

"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" Pramod Bhasin, Chairperson, ICRIER, said.

India improved from 8th to 5th globally, demonstrating accelerating digital momentum in an increasingly competitive environment.

The SIDE 2026 report uses the enhanced CHIPS framework - Connect, Harness, Innovate, Protect and Sustain, a methodology specifically designed to capture how emerging economies are navigating the AI era. India is ranked 4th on the CHIPS-AI index, behind only the United States, China and Singapore. The expanded framework covers countries representing 96% of global GDP, 93% of internet users and 91% of the world's population.

"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." Deepak Mishra, Distinguished Visiting Professor, ICRIER, said. 

India's digital transformation is increasingly driven by AI adoption, fintech innovation and a rapidly evolving startup ecosystem. The country has emerged as a globally significant exporter of digitally delivered services - software, IT services and cloud-based solutions - recording nearly $ 328 billion in digitally delivered trade despite being a lower-middle-income economy, the report said. 

"India is no longer just a large digital market - it is emerging as one of the world's most influential AI economies. At Prosus, we remain committed to supporting India's digital ecosystem as a long-term innovation partner", said Sehraj Singh, Vice President, Group Corporate Affairs & Public Policy, Prosus. 

According to the report, India's next frontier combines significant advantages with clear opportunities: the world's second-largest AI talent concentration after the United States, massive user adoption, and strong digital public infrastructure. Converting these strengths into sustained value creation will require expanded compute access, mobilised risk capital and stronger commercialisation pathways linking universities, startups and industry. 

The report emphasises that while AI adoption spreads rapidly across countries, frontier infrastructure - advanced chips, compute capacity and large language models - remains concentrated among a small group of countries and firms. India's ability to build domestic AI capabilities while leveraging its application-layer strengths will determine its competitive position in the decade ahead, it says.