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India could emerge as the world’s second-largest economy by 2038 with a GDP of $34.2 trillion in purchasing power parity terms
India could climb to No. 2 spot in global GDP rankings by 2038, EY projects
India could emerge as the world’s second-largest economy by 2038 with a gross domestic product (GDP) of $34.2 trillion in purchasing power parity (PPP) terms, according to the August edition of EY’s Economy Watch Report. The consultancy highlighted that India’s growth story is supported not just by favourable demographics but also by structural reforms and resilient economic fundamentals.
Short-term outlook
In the near term, India’s economy is projected to touch $20.7 trillion (PPP) by 2030, EY said, citing International Monetary Fund (IMF) estimates. While recent US tariffs may impact about 0.9% of India’s GDP, the report noted that the effect on GDP growth could be limited to just 0.1 percentage point if India adopts countermeasures such as diversifying exports, boosting domestic demand, and advancing trade partnerships with other countries and blocs.
What works in India’s favour
Among the world’s largest economies, India stands out for its robust fundamentals: high savings and investment rates, a relatively young population, and a sustainable fiscal position. In 2025, India’s median age will be just 28.8 years. The country also boasts the second-highest savings rate globally and a government debt-to-GDP ratio expected to decline from 81.3% in 2024 to 75.8% by 2030—unlike many peers where debt burdens are rising.
India’s economic resilience also stems from its reliance on domestic demand and growing capabilities in modern technologies, even as global uncertainties such as tariff pressures and slowing trade weigh on other economies.
Comparison with other major economies
China, the world’s largest economy in PPP terms, is projected to reach $42.2 trillion by 2030 but faces headwinds from an ageing population and rising debt levels. The United States, meanwhile, struggles with debt expected to climb to 120% of GDP and slower growth. Japan and Germany—both developed, trade-reliant economies—are constrained by high median ages and heavy dependence on global trade.
Structural reforms driving growth
EY said India’s trajectory is further strengthened by reforms, including the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code (IBC), greater financial inclusion via UPI, and the government’s production-linked incentives (PLI) scheme to boost domestic manufacturing.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
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