India could emerge as the world’s second-largest economy in purchasing power parity (PPP) terms by 2038, with GDP projected to touch USD 34.2 trillion, according to a new report by EY based on IMF projections. The study highlights India’s strong fundamentals, including its youthful population, rising domestic demand, high savings and investment rates, and structural reforms, which together position the country as a global growth leader over the next two decades.
EY noted that India stands out among major economies with a median age of 28.8 years in 2025, one of the highest savings rates globally, and a government debt-to-GDP ratio expected to fall from 81.3% in 2024 to 75.8% by 2030. This contrasts with other large economies where debt burdens are rising.
IMF Projection for 2030
The IMF report cited by EY suggests India’s economy could hit USD 20.7 trillion (PPP) by 2030. In comparison, China is expected to lead at USD 42.2 trillion, but with hurdles such as an ageing population and rising debt. The US remains resilient but faces debt exceeding 120% of GDP and slower growth. Meanwhile, Germany and Japan are limited by ageing demographics and dependency on global trade.
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India’s Unique Edge
EY underlined that India’s strength lies in its young workforce, rising domestic demand, and sustainable fiscal path, making its long-term growth trajectory the most favorable. “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. He added that resilience and investment in critical technologies would help India advance toward its Viksit Bharat 2047 goal.
Reform-Driven Growth
EY highlighted that India’s momentum is not just demographic but structural. Reforms like GST, IBC, UPI-driven financial inclusion, and production-linked incentives are enhancing competitiveness. High savings and investments are fueling capital formation, while fiscal consolidation ensures sustainability. Public investment in infrastructure, renewable energy, AI, and semiconductors is expected to bolster India’s long-term resilience and competitiveness. Alongside PPP growth, India is also projected to become the third-largest economy in market exchange rate terms by 2028, overtaking Germany.
Managing External Challenges
EY added that while US tariffs could affect about 0.9% of India’s GDP, the drag on growth can be limited to 0.1 percentage point through measures like export diversification, stronger domestic demand, and trade partnerships.
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