- India has emerged as the fifth most digitalised economy in the world in 2026, surpassing several advanced economies such as Germany, France, Japan, and Canada, according to the latest State of India’s Digital Economy Report 2026 released by the Indian Council for Research on International Economic Relations and the Prosus Centre for Internet and Digital Economy.
- The report highlights India’s remarkable progress in digital transformation, driven by rapid technological adoption, expanding digital infrastructure, growing internet penetration, and increasing use of Artificial Intelligence (AI).
India Ranks Fifth Globally in Digitalisation
- According to the report, India secured the 5th position globally among the world’s digital economies.
- The country’s strong performance enabled it to overtake several developed nations, including Germany, France, Japan and Canada.
- This achievement reflects India’s rapid progress in building a digital ecosystem supported by initiatives such as Digital India, widespread smartphone adoption, affordable internet access, digital payments, and government-led technology reforms.
India Ranks Fourth in AI Readiness
- The report also assessed countries using the CHIPS Index, which measures Artificial Intelligence preparedness across five pillars:
- C – Connect
- H – Harness
- I – Innovate
- P – Protect
- S – Sustain
Under this index, India ranked 4th globally, behind only:
- United States
- China
- Singapore
- This ranking demonstrates India’s growing influence in the global AI ecosystem and its increasing capability to leverage AI technologies across various sectors.
Key Challenges
Despite its impressive progress, the report highlighted several areas where India continues to lag behind leading AI nations.
Limited Private AI Investment
Private-sector investment in AI remains significantly lower compared to countries such as the United States and China.
Insufficient Compute Infrastructure
India faces shortages in:
- High-performance computing resources
- Advanced semiconductor capabilities
- AI training infrastructure
- Large-scale data centre capacity
Weak Commercialisation Ecosystem
The report noted the need for stronger collaboration between:
- Universities
- Research institutions
- Startups
- Industry players
to convert research innovations into commercially viable AI products and services.
Recommendations for India
The report suggested several measures to strengthen India’s long-term digital competitiveness:
- Increase availability of risk capital for AI startups.
- Expand access to advanced computing infrastructure.
- Strengthen university-startup-industry partnerships.
- Develop effective AI commercialisation pathways.
- Encourage domestic innovation in semiconductor and AI technologies.
According to the report, India’s future leadership in the digital economy will depend on its ability to build a robust innovation ecosystem and attract greater private investment.
Global AI Landscape
The report observed that while AI adoption is spreading rapidly across the world, critical AI resources remain concentrated among a limited number of countries and companies.
These include:
- Advanced semiconductor chips
- High-performance computing infrastructure
- Large Language Models (LLMs)
- Frontier AI research capabilities
As a result, countries are increasingly competing to secure technological leadership in the AI era.
Conclusion
India’s rise to become the world’s fifth most digitalised economy marks a significant milestone in its digital transformation journey. The country’s strong performance in AI adoption, digital infrastructure, and talent development highlights its growing role in the global technology landscape. However, addressing gaps in private investment, computing infrastructure, and innovation commercialisation will be essential for India to emerge as a global leader in the next phase of the digital economy.