Why India Receives Only 1% Of Global Private Investment In AI?

India's artificial intelligence led expansion is driven by several factors including its talent pool, and high-scale digital adoption, however, the gap lies lie in funding and infrastructure, which could have an impact its AI-linked future as per the State of India’s Digital Economy (SIDE) 2026 report released by the ICRIER-Prosus Centre for Internet and Digital Economy.

The report also noted that India is a talent-rich yet capital-constraint AI economy.

While the South Asian country now boasts of world’s second-largest AI talent pool after the United States and accounts for nearly 26% of global AI users, its the recipient of only 1% of global private investment in AI.

However, these finding come amid India's improved ranking in the hierarchy of global digitalisation, rising from eighth in 2025 to fifth in 2026.

"Its performance is driven by relatively strong contributions from connectivity, usage, and protection and sustainability, although it continues to lag in innovation as compared with the top performers," it said.

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This mismatch highlights a structural challenge in converting the country's AI talent pool into large-scale innovation and globally competitive technology firms.

On the other hand, inclusion of AI indicators has contributed to ranking improvement for India given it has emerged as the fourth-largest AI performer in the sample, after the United States, China and Singapore.

India’s overall fifth position is particularly notable, as it now ranks alongside advanced economies despite its lower per capita income levels.

Notably, the country remains less digitally saturated than most advanced digital economies, which allows faster year-on-year gains in several indicators.

For example, internet users in India increased by 8.8%, compared with average growth rate of 2.1% among the other nine countries in the top 10.

A similar pattern is visible in several Harness indicators, including digital payments and technology use, where India continues to grow faster than many top-ranked countries.

However, frontier AI development remains heavily dependent on access to advanced compute infrastructure, high-end chips, and sustained risk capital—areas where global concentration remains high.

As AI becomes critical to central to economic growth, the SIDE 2026 report noted that India is at a critical inflection point—where its ability to convert talent advantage into innovation capacity will determine its standing in the next phase of the global digital economy.