India Digital Economy has achieved a major milestone in 2026 as the country climbed to the 5th position in global digital economy rankings while securing the 4th position in Artificial Intelligence (AI) performance. The achievement highlights India’s growing influence in technology, innovation, digital services, and AI development.

The latest findings were published in the State of India’s Digital Economy 2026 report, released by the ICRIER-Prosus Centre for Internet and Digital Economy on 29 May 2026. The report examined various indicators, including AI performance, digital trade, digital adoption, innovation, and talent development.

India Moves Up in Digital Economy Rankings

India made significant progress in the global digital economy landscape. In 2025, the country was ranked 8th, but within a year it improved to 5th place. This jump reflects the rapid growth of digital infrastructure, online services, technology startups, and internet-based businesses across the country.

The report shows that India is now among the world’s leading digital economies. Only a few countries currently rank ahead of India in this sector. The improvement demonstrates how digital technologies are becoming a key driver of economic growth.

Government initiatives promoting digital payments, online governance, broadband connectivity, and digital entrepreneurship have played an important role in this transformation.

India Becomes a Leading AI Power

Artificial Intelligence is one of the fastest-growing technology sectors in the world, and India has emerged as a major player. According to the report, India ranked 4th globally in AI performance.

The country trails only the United States, China, and Singapore in overall AI performance. This ranking places India ahead of several developed nations, including Germany, France, Japan, the United Kingdom, and Canada.

India’s strong performance reflects the growing use of AI across industries such as healthcare, education, agriculture, finance, manufacturing, and public services.

Experts believe that AI will become one of the most important technologies shaping economic growth in the coming years. India’s strong position gives it an opportunity to become a global leader in AI innovation and adoption.

World’s Second-Largest AI Talent Pool

One of the biggest strengths behind India’s AI success is its skilled workforce. The report states that India has the world’s second-largest AI talent pool.

Thousands of engineers, researchers, software developers, and technology professionals are contributing to AI development. Educational institutions and technology companies are also investing heavily in AI training and research.

A study by LinkedIn, referenced in Stanford University’s AI Index 2026, found that India ranked first globally in AI skill penetration on LinkedIn. This indicates that a large share of Indian professionals possess AI-related skills.

India also ranked second worldwide in AI talent growth between 2019 and 2025, showing rapid expansion in the number of AI professionals.

Strong Growth in Digital Trade

India’s digital economy growth is also visible in international trade. The report estimates that India generated approximately US$328 billion through digitally delivered trade.

This category includes software exports, IT services, cloud computing solutions, online business services, and other services delivered through digital networks.

India’s information technology industry continues to serve businesses and customers across the world. Demand for software development, cybersecurity services, cloud platforms, and digital consulting has contributed significantly to export earnings.

The rise of digital trade has helped create jobs, attract investment, and strengthen India’s position in the global technology market.

Developing Nations Drive AI Usage

The report highlights a major global trend. Developing countries now account for nearly 72% of global AI users.

India and China together represent almost two-fifths of the world’s AI user base. This reflects the growing adoption of AI technologies across Asia and other developing regions.

As internet access expands and digital services become more affordable, AI tools are increasingly being used by businesses, students, professionals, and government agencies.

The growing user base creates new opportunities for innovation, digital services, and economic growth.

Challenge of Talent Retention

Despite strong achievements, the report identifies one important challenge. India recorded a net outflow of AI authors and inventors during 2025.

This means that some researchers, innovators, and technology experts moved to other countries for education, employment, or research opportunities.

Experts suggest that increasing investments in research facilities, innovation hubs, startup funding, and advanced technology infrastructure can help retain more talent within the country.

Addressing this issue will be important for maintaining India’s long-term leadership in AI and digital technologies.

Digital Future Looks Promising

India’s rise in both AI performance and digital economy rankings reflects the country’s growing technological capabilities. The combination of a large talent pool, expanding digital trade, strong startup ecosystem, and increasing AI adoption has created a solid foundation for future growth.

With continued investments in innovation, digital infrastructure, and advanced technologies, India is expected to strengthen its position as one of the world’s leading digital economies in the coming years.