India may become world’s 2nd largest economy in PPP terms by 2038: EY

India may become the world’s second-largest economy in terms of Purchasing Power Parity (PPP) by 2038, with a projected GDP of USD 34.2 trillion backed by strong fundamentals, including high savings and investment rates, favorable demographics, and a sustainable fiscal position, the EY report said.

‘PPP’ refers to the economic metric that determines the relative value of different national currencies by comparing the price of a common ‘basket of goods and services’ in each country.

Ernst & Young report stated that “Among the largest economies, India stands out with a median age of 28.8 years in 2025, the second highest savings rate, and a government debt-to-GDP ratio projected to decline from 81.3% in 2024 to 75.8% in 2030, unlike peers' debt level rising.”

DK Srivastava, chief policy advisor, EY, said, “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. By building resilience and advanced capabilities in critical technologies, India is well-placed to move closer to its Viksit Bharat aspirations by 2047.”

The report also noted that India is projected to become the third-largest economy in market exchange rate terms by 2028, overtaking Germany. While US tariffs may affect nearly 0.9% of India’s GDP, their impact on GDP growth can be contained to 0.1 percentage point by taking countermeasures like export diversification.