New Delhi [India], June 1 : In the rapidly evolving global technology landscape, India has shattered traditional economic trajectories to emerge as a premier digital superpower, climbing to 5th place globally on the 2026 CHIPS-Combined index, according to the State of India Digital Economy (SIDE) report.
The definitive report revealed a unique phenomenon: a developing nation with lower per capita income successfully rivalling advanced economies through sheer population scale, robust connectivity, and an unparalleled digital service export engine.
India has climbed from 8th place in 2025 to become the 5th most digitalised country in the world in 2026 (scoring 36.90 on the CHIPS-Combined index). It now ranks alongside advanced economies despite its lower per capita income.
India's digital economy is heavily driven by scale. It accounts for 31% of the G20's population and roughly 22% of its core connectivity users (internet, mobile, and smartphones). India's high ranking is fueled by strong contributions from connectivity (11.9) and harnessing/usage of digital technologies (9.2).
The findings outline a nation executing a highly strategic, application-driven tech playbook. While intentionally bypassing capital-intensive, frontier hardware sectors due to constrained start-up capital, India has carved out a massive, talent-led niche.
Today, the country accounts for nearly a fifth of all global AI users and commands the world's second-largest concentration of AI talent, anchoring its future in low-cost sovereign AI and small language models. Simultaneously, India has broken the mould for developing economies by becoming the world's 4th largest exporter of digital services, driving a massive USD 328 billion in digitally delivered trade.
In a pure, standalone AI index, India ranks 4th globally, trailing only the US, China, and Singapore, while outperforming Germany, France, Japan, Canada, and South Korea. India accounts for 19.9% of global AI users (essentially tied with China at 20.5%). It possesses the second-largest concentration of AI talent in the world, trailing only the US.
As per the report, India is intentionally avoiding capital-heavy AI layers (like advanced chip manufacturing or massive compute) due to limited start-up/patient capital. Instead, its comparative advantage lies in a talent-led, application-driven AI ecosystem focused on low-cost sovereign AI models, frugal innovation, and small language models.
While developing nations generally consume digital services rather than export them, India is a massive exception. With USD 328 billion in digitally delivered trade, India is the 4th largest exporter of digital services globally, rivalling high-income nations.
The report noted that India's domestic trade policy has not fully adjusted to this reality; India continues to oppose the WTO moratorium on e-commerce customs duties, even though it has transitioned from a net importer to a dominant global exporter.
However, the report balances this meteoric rise with a stark look at India's vulnerabilities. The nation faces an innovation lag in frontier segments like robotics and private AI investments, and its cyber-defence mechanisms are under strain.
India significantly lags behind frontier nations in core innovation (scoring 5.3 compared to China's 10.1 and the US's 20.6). It is underrepresented in capital-intensive, frontier segments like robotics, drones, AR/VR, and private AI investment (accounting for only 1% of the G20's private AI investment).
While India shines in basic connectivity, it has lower relative shares in advanced applications within the G20, accounting for only 15% of e-commerce users and 14% of digital payment users.
As a top-10 enterprise ransomware target with a modest cybersecurity budget, India faces an urgent imperative to bolster its "Protect and Sustain" frameworks. Furthermore, its massive scale has inadvertently turned it into a major global generator of e-waste, necessitating early and robust recovery systems.
India ranks 32nd globally in the Protect + Sustain pillar. While its digital risks remain contained relative to its massive population, cyber threats are expanding. India is already among the top 10 enterprise ransomware victims and a major source of global email leaks. However, its cybersecurity spending (USD 3.06 billion) remains highly modest relative to its user base.
Driven by population scale, India is one of the largest aggregate generators of electronic waste (accounting for 9% of the G20's e-waste), even though its per capita e-waste remains very low (2.9 kg per person). The report emphasises the need to build robust e-waste recovery systems early.
The report paints a picture of a digital giant at a geopolitical crossroads. Whether through integrating its UPI network into the BRICS Pay framework or collaborating with the European Union to champion a democratic, DPI-driven "Third Path" as an alternative to US Big Tech and Chinese state-led models, India is no longer just participating in the global digital economy--it is actively rewriting its rules.
India is a core engine of the BRICS digital bloc. The report notes a major opportunity to link India's UPI with other member payment networks (like Brazil's Pix) via the planned "BRICS Pay" system to bypass Western financial dominance (like SWIFT) and slash transaction costs.
India's population-scale Digital Public Infrastructure (DPI) model, combined with the EU's strict regulatory standards, could forge a democratic, rights-based "third path" for global technology, serving as an alternative to the US Big Tech platform model and China's state-led model.