Business

India Set To Become World’s Second-Largest Economy In PPP Terms By 2038: EY

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 a report by EY, based on IMF projections.

The report said India’s economy is on track to hit USD 20.7 trillion (PPP) by 2030, placing it ahead of most peers.

EY Highlights India’s Unique Advantages among Major Economies

EY highlighted India’s strong fundamentals compared to the US, China, Germany, and Japan.

With a median age of 28.8 years in 2025, the second-highest savings rate, and a declining government debt-to-GDP ratio, from 81.3% in 2024 to 75.8% by 2030, India stands out as a growth leader.

While China is projected to reach USD 42.2 trillion (PPP) by 2030, it faces challenges from an ageing population and rising debt. The US, though strong, struggles with debt levels exceeding 120% of GDP and slower growth.

Germany and Japan are constrained by high median ages and dependence on global trade.

EY said India’s growth trajectory rests on a combination of youthful demographics, rising domestic demand, and fiscal sustainability.

“India’s comparative strengths—its young and skilled workforce, robust saving and investment rates, and sustainable debt profile—will help sustain high growth even in a volatile global environment,” said DK Srivastava, Chief Policy Advisor, EY India.

He added that India can move closer to its Viksit Bharat 2047 aspirations by advancing critical technologies.

EY credited India’s resilience not just to demographics but also to structural reforms. Initiatives such as the Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC), UPI-based financial inclusion, and production-linked incentives (PLI) are boosting competitiveness.

High saving and investment rates are fueling capital formation, while fiscal consolidation is strengthening sustainability.

Investments in Infrastructure and Technology

The report noted that public investment in infrastructure and adoption of emerging technologies like AI, semiconductors, and renewable energy are setting the stage for long-term growth.

EY also projected that India will become the third-largest economy in market exchange rate terms by 2028, overtaking Germany.

EY said external challenges, such as US tariffs, could impact 0.9% of India’s GDP.

Countermeasures like export diversification, stronger domestic demand, and advancing trade partnerships can contain the effect on growth to 0.1 percentage points.

Also Read: Cultural Flexibility Drives India’s Rise As Global Capability Centre Hub

Purnima Mishra

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