India’s digital economy has climbed to fifth place globally, according to a new ICRIER report, while the country also ranks fourth on the Chips-AI Index amid rapid growth in digital adoption and AI usage.

India Moves Up Global Rankings

India has emerged as the world’s fifth-most digitised economy, overtaking several advanced nations including Germany, France, Japan and Canada, according to a new report released by the Indian Council for Research on International Economic Relations (ICRIER).

The findings were published in the State of India’s Digital Economy (SIDE) 2026 report on Friday, highlighting the country’s rapid progress in digital infrastructure, fintech adoption and technology-driven innovation. The latest ranking marks a significant jump from 2025, when India was placed eighth globally.

The study assessed 71 countries that collectively account for nearly 96% of global gross domestic product (GDP), offering one of the broadest snapshots of digital competitiveness worldwide.

Ahead of Developed Nations

The report notes that India has now surpassed several major developed economies in overall digital performance. The achievement reflects the growing scale of the country’s digital ecosystem, which has expanded rapidly over the past few years through increased internet penetration, digital public infrastructure and widespread adoption of online services.

According to the assessment, India’s digital transaction ecosystem remains one of the strongest globally, with transactions worth approximately ₹31 lakh crore being processed through digital platforms.

Analysts say the country’s digital transformation has been supported by a combination of government-led initiatives, private-sector innovation and the growing acceptance of digital services among consumers and businesses alike.

Strong AI Performance

Alongside its broader digital gains, India has also recorded notable progress in artificial intelligence.

The report places India fourth on the global Chips-AI Index, behind only the United States, China and Singapore. The ranking reflects the country’s growing AI capabilities, talent pool and adoption levels across sectors.

India has also emerged as the second-largest hub of AI talent globally. Industry experts view this as a strategic advantage at a time when countries are competing to strengthen their positions in emerging technologies.

The findings suggest that AI is becoming a major component of India’s digital economy, with startups, technology firms and research institutions increasingly investing in AI-based applications and services.

Developing Countries Lead Usage

One of the report’s notable observations is the shifting geography of AI adoption.

According to the study, around 72% of the world’s AI users are now located in developing countries. India and China together account for nearly 40% of global AI usage, underscoring the growing influence of emerging economies in shaping the future of digital technologies.

India alone contributes roughly 26% of global AI users, indicating the scale at which AI-powered tools and platforms are being adopted across the country.

Experts believe rising smartphone penetration, affordable internet access and growing digital literacy have helped accelerate the use of AI-enabled services among Indian consumers.

Investment Gap Remains

Despite its strong performance in digital adoption and AI talent, the report identifies investment as a major challenge.

India currently attracts only about 1% of global private AI investment. The report points out that advanced semiconductor technologies, high-end computing infrastructure and large-scale AI models remain concentrated in a handful of countries.

This imbalance could limit long-term competitiveness unless investment levels improve significantly.

Need for Innovation Push

Researchers and policy experts associated with the study have stressed the importance of increasing investment in research, innovation and advanced technology development.

The report recommends stronger collaboration between startups, universities and industry players to build indigenous capabilities in critical technologies. It also highlights the need to expand computing infrastructure and encourage greater private-sector participation in AI research.

While India’s rise to become the fifth-largest digital economy marks a major milestone, experts say sustaining this momentum will depend on how effectively the country addresses investment gaps and strengthens its innovation ecosystem in the years ahead.