India Set to Become Second-Largest Economy in PPP Terms by 2038: EY Report

India is on a transformative economic journey, and recent projections suggest a significant milestone is within reach. According to a new EY report based on IMF data, India is poised to become the second-largest economy in the world by 2038 in purchasing power parity (PPP) terms, with a projected GDP of USD 34.2 trillion. This development marks a major leap forward for India, positioning it as a key driver of global growth in the coming decades.

India’s Economic Edge in a Shifting Global Landscape

Youthful Demographics and Domestic Demand

One of India’s most prominent advantages is its demographic dividend. In 2025, India’s median age is expected to be just 28.8 years, making it the youngest among the major economies. This young, dynamic workforce is essential for driving productivity, innovation, and consumer demand.

Alongside this, India holds the second-highest savings rate among large economies, enabling robust capital formation. Domestic consumption is also on a consistent upward trajectory, supporting long-term internal growth even amid external uncertainties.

Fiscal Responsibility and Structural Strength

Declining Debt-to-GDP Ratio

Unlike many advanced economies grappling with increasing public debt, India’s debt-to-GDP ratio is forecasted to decline from 81.3% in 2024 to 75.8% by 2030. This fiscal consolidation signals a commitment to sustainable financial management, enhancing investor confidence.

Impactful Economic Reforms

India’s economic resilience is further reinforced by a wave of impactful structural reforms, including,

• Goods and Services Tax (GST): Simplifying the tax system and improving compliance.
• Insolvency and Bankruptcy Code (IBC): Streamlining resolution of stressed assets.
• UPI and digital financial inclusion: Revolutionizing transactions and improving banking access.
• Production-linked incentive (PLI) schemes: Boosting domestic manufacturing across sectors.

These reforms have significantly enhanced India’s competitiveness and economic efficiency.

Infrastructure, Innovation, and Technological Resilience

Investment in Key Sectors

India is heavily investing in infrastructure, with public spending paving the way for more efficient logistics and connectivity. Additionally, the country’s increasing focus on emerging technologies such as artificial intelligence, semiconductors, and renewable energy is positioning it for long-term economic resilience and innovation leadership.

India vs Other Global Giants

The EY report contrasts India’s promising trajectory with challenges faced by other major economies,

• China, while leading in absolute PPP terms (USD 42.2 trillion by 2030), faces serious headwinds such as an ageing population and rising debt.
• The US, despite its robust economy, struggles with debt levels exceeding 120% of GDP and slower growth rates.
• Germany and Japan, although technologically advanced, are constrained by older populations and dependency on global trade.