A New Way to Measure Digital Capability

A fresh and relevant approach

Countries are tracking their progress in technological capabilities as there are times when artificial intelligence (AI) matters more than military artillery and economies must remain competitive.

A fresh and relevant approach to assessing digital competitiveness has been developed by the Indian Council for Research on International Economic Relations (ICRIER). The Delhi-based international think tank has a new report called ‘State of India’s Digital Economy’ that assesses national capabilities using a framework that analyses connectivity, harnessing of technology, innovation, protection against cyberattacks, and sustainability OR CHIPS

Indices developed by ICRIER’s Prosus Centre for Internet and Digital Economy assessed digitisation of the Indian economy and users for the report. India is the eighth most digitalised among 32 countries assessed. The seven countries that are ahead of India are the United States (US), China, Singapore, South Korea, Denmark, the United Kingdom (UK) and Germany.

Most other recent global rankings for digitalisation and technology readiness didn’t consider scale. They looked at the overall percentage of digitalisation or used a per-capita metric. But “digitalisation in the AI era can’t be measured using telecom-era metrics,” says Deepak Mishra, director and chief executive of ICRIER and co-author of the report.

“Many global indices on digitalisation have consistently underestimated the digital potential of large emerging markets. For example, IMF’s [International Monetary Fund] Artificial Intelligence Preparedness Index, ITU’s [International Telecommunication Union] ICT Development Index, United Nations’ E-Government Development Index and Portulans Institute’s Network Readiness Index have maintained that the developed countries, including European countries, are digitally more advanced than emerging markets such as Brazil, China, India and Indonesia,” said the ICRIER report. India was 49th among 64 countries ranked for digital competitiveness by the International Institute for Management Development in Lausanne, Switzerland.

With AI model Deepseek in China, India’s digital identity programme Aadhaar, Pix, an interoperable real time payments system in Brazil, digital wallets in Indonesia and neobanking in Nigeria, developing countries are moving from the margins to the mainstream of digital innovation. They account for the global majority of internet and smartphone users, making them an integral part of the world’s digital economy, said ICRIER.

India is the eighth most digitalised country based on the CHIPS framework but it is the third largest such economy, behind only China and the US and ahead of South Korea, the UK and Singapore. This is largely due to India being a global leader in terms of the volume of digital transactions and export of information and communication technology services.

However, India’s rank falls to 28th in terms of digitilisation of its citizens. With a large unconnected population, India has to invest far more in its digital connectivity infrastructure. “India’s second largest network of internet and smartphone users globally, coexists with over 40 percent non-users of internet and over 50 percent without smartphones. Being the country with the largest population gives it unprecedented scale, but having the lowest per capita (among countries assessed) burdens it with a large share of unconnected population.”

India performs particularly well in investments and startups: It has the third largest number of unicorns (startups whose valuations exceed $1 billion) in the world and continues to receive fairly large sums of venture capital funds. India is also a large consumer of decentralised finance with the help of digital public infrastructure like Unified Payments Interface. However, India lags in the AI category as a consequence of low infrastructure availability and “lack of competing deep tech research”.

The national focus on the IndiaAI mission, quantum technologies, semiconductors and investment in connectivity infrastructure could boost India’s global digital competitiveness. India and other growth economies will have to invest in new measurement systems that can track digital penetration and impact within short time cycles while benchmarking against global standards.

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