India emerges as 3rd largest digitised economy: Report

India has emerged as the third largest digitalised country in the world, behind the United States and China, and is in race for artificial intelligence (AI) dominance on the global stage, according to a latest report by Indian Council for Research on International Economic Relations (ICRIER).  India ranks 11th in AI research and 16th in infrastructure, highlighting the need for greater investment to compete globally, revealed the third edition of the 'State of India’s Digital Economy (SIDE) 2025' report by the ICRIER-Prosus Centre for Internet and Digital Economy (IPCIDE).

As per the report, the rise of India is part of a larger story of the rise of the global south in the world’s digitalisation map, with China being the second most digitalised country, and India, Brazil, Thailand and Nigeria overtaking many developed nations.

“While India boasts of a large number of users and a high level of digital, the average Indian remains only modestly digitalised. When country and user level scores are combined, India’s rank falls to 8th in a group of 32 countries (G32, comprising of 17 developed and 15 developing),” the report noted.

Over the years, the U.S. and China have gained a decisive lead over the rest of the world in the AI race, followed by South Korea, Singapore and the Netherlands. India is positioned at 11^th place in AI research and at 16^th spot on AI infrastructure in G32. But with appropriate investment and policies, India can develop the scale and capability to challenge the AI hegemony of the US and China, said the IPCIDE report.

Speaking at the event, India’s G20 Sherpa, Amitabh Kant, said, “The future of India's economy is entirely digital, and the SIDE 2025 report helps establish how much progress India has made already. The artificial intelligence race actually has just begun, and this race is wide open, and the race will not be won by those who built up very high cost model but by those who democratize technology, use open source, and use cost competitive models.”

“The government must strengthen digital infrastructure, businesses must continue to innovate, startups must continue to disrupt, and individuals must embrace more and more digital skills. The government, business, startups and citizens must work together to ensure an inclusive, sustainable and innovation driven digital growth in India,” he added.

The SIDE 2025 report showed that India has the world’s second largest mobile and internet network by number of users. Few countries see data traffic per smartphone as high as in India. India is also the global leader in terms of the volume of digital transactions and export of ICT services. However, despite rapid mobile broadband adoption and some of the highest mobile data usage rates globally, fixed broadband infrastructure remains underdeveloped, limiting long-term digital resilience. While inclusion efforts are making progress, with UPI significantly reducing gender and urban-rural disparities, geographical divides in access to other digital services continue to persist, the report highlighted.

India’s large population gives it the advantage of scale but also creates risk of cyber threats and environmental degradation due to the rapid digitalisation. There is considerable scope of improvement when it comes to dealing with these risks, the report noted.