India Is Projected To Become The Second-Largest Economy By 2038 With Strong Growth Indicators: EY Report

India is on track to become the world's second-largest economy in terms of purchasing power parity (PPP) by 2038, with an estimated GDP of USD 34.2 trillion, according to a report by EY. This prediction is based on projections from the International Monetary Fund (IMF). India's unique position among major economies is highlighted by its young population and strong economic indicators.

EY's report suggests that India's economy could reach USD 20.7 trillion (PPP) by 2030. The country is expected to surpass Germany as the third-largest economy in market exchange rate terms by 2028. India stands out with a median age of 28.8 years in 2025, a high savings rate, and a government debt-to-GDP ratio projected to decrease from 81.3% in 2024 to 75.8% by 2030.

Comparative Economic Strengths

In contrast to other large economies, India benefits from youthful demographics and rising domestic demand. While China leads with a projected USD 42.2 trillion economy (PPP) by 2030, it faces challenges such as an ageing population and increasing debt levels. The US, though strong, struggles with high debt exceeding 120% of GDP and slower growth rates.

Germany and Japan are advanced economies but are constrained by high median ages and heavy reliance on global trade. "While China leads in overall size with a projected USD 42.2 trillion economy (PPP) by 2030, its ageing population and rising debt are challenges," said EY in a statement.

Structural Reforms and Resilience

India's growth trajectory is supported not only by demographics but also by structural reforms and solid fundamentals. High saving and investment rates are driving capital formation, while fiscal consolidation enhances sustainability. Reforms like GST, IBC, financial inclusion through UPI, and production-linked incentives bolster competitiveness across industries.

The country's public investment in infrastructure and adoption of emerging technologies such as AI, semiconductors, and renewable energy are paving the way for long-term resilience. DK Srivastava, Chief Policy Advisor at EY India, stated that India's young workforce and sustainable debt profile will sustain high growth even amid global volatility.

Impact of External Factors

US tariffs might impact nearly 0.9% of India's GDP; however, their effect on GDP growth can be limited to just 0.1 percentage point through measures like export diversification and stronger domestic demand. Advancing trade partnerships will also play a crucial role in mitigating these impacts.

"India's comparative strengths, its young and skilled workforce, robust saving and investment rates, and relatively sustainable debt profile will help sustain high growth even in a volatile global environment," said DK Srivastava.

The combination of youthful demographics, rising domestic demand, and a sustainable fiscal outlook positions India for favourable long-term growth prospects. As India continues to build resilience and advance capabilities in critical technologies, it moves closer to achieving its Viksit Bharat aspirations by 2047.