India Poised to Become World’s Second-Largest Economy by 2038, EY Report Says

India is on track to 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 (Ernst & Young) based on International Monetary Fund (IMF) projections.

The report underscores India’s unique demographic and economic strengths compared to other major economies. With a median age of just 28.8 years in 2025, a robust savings rate, and a government debt-to-GDP ratio projected to decline from 81.3 per cent in 2024 to 75.8 per cent by 2030, India stands out amid peers whose debt levels are rising.

Citing IMF projections, EY said India’s economy could reach USD 20.7 trillion (PPP) by 2030. “While China leads in overall size with a projected USD 42.2 trillion economy (PPP) by 2030, its ageing population and rising debt present structural challenges. The US, though strong, faces debt exceeding 120 per cent of GDP and slower growth. Germany and Japan, despite being advanced, are constrained by high median ages and heavy dependence on global trade,” the report noted.

In contrast, India combines a young workforce, expanding domestic demand, and a sustainable fiscal outlook, giving it one of the most favourable long-term growth trajectories among major economies.

“India’s strengths lie in its young, skilled workforce, strong savings and investment rates, and a relatively sustainable debt profile, which will help maintain high growth even in volatile global conditions,” said DK Srivastava, Chief Policy Advisor, EY India. “By building resilience and advancing capabilities in critical technologies, India is well-positioned to move closer to its ‘Viksit Bharat’ aspirations by 2047.”

The report emphasizes that India’s rise is reinforced not only by demographics but also by structural reforms and resilient economic fundamentals. High savings and investment rates are driving capital formation, while fiscal consolidation is improving sustainability. Landmark reforms such as GST, the Insolvency and Bankruptcy Code (IBC), financial inclusion through UPI, and production-linked incentive schemes are enhancing competitiveness across sectors.

Public investment in infrastructure and rapid adoption of emerging technologies—including artificial intelligence, semiconductors, and renewable energy—are laying the foundation for long-term resilience, EY noted.

India is also projected to become the third-largest economy in market exchange rate terms by 2028, surpassing Germany. The report further noted that even external risks, such as US tariffs affecting 0.9 per cent of India’s GDP, are unlikely to derail growth, with potential impacts on GDP limited to just 0.1 percentage point through measures like export diversification, stronger domestic demand, and deeper trade partnerships.

EY’s analysis paints a picture of a nation whose combination of youthful demographics, fiscal prudence, technological ambition, and structural reforms could position it as a global economic powerhouse by mid-century.

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