India’s economy is on track to emerge as the world’s second-largest by 2038, with a projected GDP of USD 34.2 trillion in purchasing power parity (PPP) terms, according to the latest EY Economy Watch report.
By 2030, India’s GDP could reach USD 20.7 trillion (PPP), driven by strong fundamentals such as high savings and investment rates, a young workforce, and resilient domestic demand. India is already the third-largest economy in PPP terms, behind only the US and China.
The report highlighted that despite global challenges, including slowing trade and new US tariffs, India’s economic strength remains robust. If India maintains an average growth rate of 6.5% beyond 2030, compared to the US rate of 2.1%, it could surpass the US economy in PPP terms by 2038.
In market exchange rate terms, India is also expected to become the third-largest economy by 2028, overtaking Germany.
However, the report cautioned about the impact of the recently imposed 50% US tariffs on Indian goods worth over USD 48 billion. Key sectors likely to be affected include textiles, gems and jewellery, leather, chemicals, and machinery. Still, with suitable countermeasures, the negative effect on GDP could be limited to just 0.1%, reducing expected medium-term growth only marginally from 6.5% to 6.4%.
Commenting on the outlook, D.K. Srivastava, Chief Policy Advisor at EY India, said:
“India’s comparative strengths — a young skilled workforce, strong savings, and sustainable debt levels — will continue to power high growth. By advancing technology and building resilience, India is well-placed to move closer to its Viksit Bharat 2047 aspirations.”
