India has emerged as the world’s fifth most digitalised economy and ranked fourth globally in artificial intelligence (AI) performance, according to 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, which benchmarked 71 countries representing 96% of global GDP, said India improved its overall digital economy ranking from eighth position in 2025 to fifth this year, overtaking several developed economies including Germany, France, Japan, the UK, and Canada on key AI and digital metrics. 

India ranked behind only the US, China and Singapore in the standalone AI Index, highlighting the country’s growing role in the global AI ecosystem. The report also pointed to a major shift in global AI adoption trends, noting that 72% of global AI users are now based in developing countries. India and China together account for nearly two-fifths of worldwide AI users. 

“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, Chairperson of Indian Council for Research on International Economic Relations. 

AI adoption and digital trade gain momentum 

The report said India generated nearly $328 billion in digitally delivered trade, including software exports, IT services, and cloud-based solutions, despite remaining a lower-middle-income economy. 

India also now accounts for nearly half of digitally delivered services exports among BRICS nations, according to the report. “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, Distinguished Visiting Professor at ICRIER. 

The report highlighted India’s strengths in AI talent and digital infrastructure, noting that the country has the world’s second-largest AI talent pool after the US. However, it cautioned that India commands only around 1% of global private AI investment despite accounting for 26% of global AI users. 

“India is no longer just a large digital market — it is emerging as one of the world’s most influential AI economies,” said Sehraj Singh, Vice President, Group Corporate Affairs and Public Policy at Prosus. 

Concerns over infrastructure and cyber risks 

The report said frontier AI infrastructure, including advanced semiconductor chips, compute capacity, and large language models, remains concentrated among a small group of countries and firms globally. 

It added that India’s long-term competitiveness in AI would depend on expanding compute access, mobilising risk capital and strengthening commercialisation pathways between universities, startups and industry. 

The report also flagged rising cybercrime, digital fraud, digital exclusion and environmental concerns as emerging risks associated with rapid digitalisation. 

According to the report, online financial fraud has become one of the fastest-growing categories of crime in India, underlining the need for stronger investments in cybersecurity and digital safeguards. 

The report used an expanded CHIPS framework — Connect, Harness, Innovate, Protect, and Sustain — to assess how emerging economies are navigating the AI era.