India to Become World’s Second-Largest Economy in PPP Terms by 2038: EY Report

India is on track to become the world’s second-largest economy in terms of Purchasing Power Parity (PPP) by 2038, according to a recent report by global consultancy EY. The projection highlights India’s strong economic potential, driven by favorable demographics, high savings and investment rates, and a sustainable fiscal path.

Citing data from the International Monetary Fund (IMF), EY estimates that India’s economy could reach $20.7 trillion in PPP terms by 2030, surpassing the United States, Germany, and Japan, second only to China.

China is projected to retain the top position with a $42.2 trillion PPP economy by 2030, though it faces challenges such as an aging population and rising debt. The United States, while resilient, is constrained by a national debt exceeding 120 percent of GDP and slower long-term growth. Advanced economies like Germany and Japan also face demographic challenges and a dependence on global trade.

India’s advantage lies in its young and growing population, with a projected median age of 28.8 years in 2025, along with strong domestic savings and investments. Government debt is expected to decline from 81.3 percent of GDP in 2024 to 75.8 percent by 2030, pointing to a more sustainable fiscal outlook.

“India’s 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 at EY India.

The report also highlights the role of structural reforms, investments in emerging technologies, and resilient economic fundamentals in supporting India’s growth. By 2028, India is expected to overtake Germany to become the third-largest economy in the world in nominal (market exchange rate) terms.

According to EY, this growth path aligns with India’s long-term goal of becoming a developed nation, or Viksit Bharat, by 2047.