India could emerge as the world’s second-largest economy in purchasing power parity (PPP) terms by 2038 with a projected GDP of USD 34.2 trillion, according to an EY analysis based on International Monetary Fund (IMF) projections.
Strong Growth Outlook Backed by Demographics and Fiscal Strength
The report highlights India’s unique combination of a young population — with a median age of 28.8 years in 2025 — a high savings rate, and a declining government debt-to-GDP ratio, projected to fall from 81.3% in 2024 to 75.8% by 2030. This contrasts with major economies like the US, China, Germany, and Japan, where debt levels are on the rise.
By 2030, the IMF estimates India’s economy could touch USD 20.7 trillion (PPP). In comparison, China is projected at USD 42.2 trillion but faces an ageing population and mounting debt, while the US will contend with debt exceeding 120% of GDP and slower growth. Germany and Japan are expected to remain constrained by older populations and heavy dependence on global trade.
“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, Chief Policy Advisor, EY India.
Reform Momentum and Investment Boost
EY credited India’s resilience to structural reforms such as the Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC), financial inclusion via UPI, and production-linked incentives. Rising public investment in infrastructure, alongside rapid adoption of emerging technologies including AI, semiconductors, and renewable energy, is expected to further strengthen long-term growth prospects.
High savings and investments are fuelling capital formation, while fiscal consolidation is enhancing macroeconomic stability. These factors, EY said, put India on a favourable trajectory to achieve its Viksit Bharat (developed nation) goals by 2047.
Market-Exchange Rankings and Trade Challenges
In market exchange rate terms, India is on track to become the world’s third-largest economy by 2028, overtaking Germany. While recent US tariffs may affect 0.9% of India’s GDP, EY estimates that the growth impact could be limited to 0.1 percentage point with countermeasures such as export diversification, boosting domestic demand, and strengthening trade partnerships.
