India’s Journey to Becoming the World’s Second-Largest Economy by 2038.

India’s Journey to Becoming the World’s Second-Largest Economy by 2038

India is projected to emerge as the world's second-largest economy by 2038, buoyed by strong fundamentals such as a young skilled workforce, high investment rates, and technological advancements, according to a recent EY report. The report highlights India's rapid growth prospects, resilience against global uncertainties, and its potential to surpass the U.S. economy in purchasing power parity (PPP) terms within the next 15 years.

India's Economic Rise: Key Insights from the EY Report

The EY Economy Watch (August 2025) underscores India's dynamic economic landscape, forecasting its GDP to reach USD 20.7 trillion by 2030 in PPP terms. This growth trajectory positions India as the third-largest economy today, behind China and the U.S. The report projects continued robust growth beyond 2030, with an average growth rate of 6.5%, compared to the U.S.'s 2.1%. If maintained, India could surpass the U.S. to become the world’s second-largest economy by 2038 with a GDP valued at USD 34.2 trillion in PPP terms.

India is also expected to become the third-largest economy measured by market exchange rates by 2028, overtaking Germany. This rapid ascent is attributed to several structural strengths including a favorable demographic profile, high savings and investment rates, and a sustainable fiscal position. The report also points out India's increasing capabilities in modern technologies as a key driver of this growth momentum.

Navigating Global Challenges and Tariff Issues

Despite facing global uncertainties, including tariff pressures from the U.S., India’s domestic demand and economic resilience help mitigate adverse impacts. The report analyzed the recent steep U.S. tariffs imposed on Indian exports, estimating that about 0.9% of India’s GDP might be affected through trade channels. However, with strategic countermeasures—such as reducing imports and boosting domestic demand—India can limit these impacts to approximately 0.1% of GDP growth, a modest reduction of 10 basis points from an expected 6.5% growth rate.

Sectors bearing the brunt of U.S. tariffs include textiles and clothing, gems and jewelry, shrimp, leather and footwear, and electrical machinery. Meanwhile, pharmaceutical, energy, and electronic goods sectors remain unaffected by these tariffs. The U.S. remains India’s largest trading partner, with bilateral goods trade hitting USD 131.8 billion in 2024-25.

The Road to a Viksit Bharat by 2047

EY India’s Chief Policy Advisor, D K Srivastava, emphasized that India's comparative strengths—a young, skilled labor force, healthy savings rates, and a sound debt profile—position it well for sustained high growth even amidst global volatility. By advancing resilience and capabilities in critical technologies, India is poised to make significant progress toward its vision of a developed nation ("Viksit Bharat") by the year 2047.

This optimistic outlook portrays India not just as a rising economic power but also as an emerging global technological and innovation hub with the potential to shape the international economic order in the decades ahead.

This analysis reflects the hopeful and strategic path that India is taking to consolidate its position among the world's economic heavyweights, while carefully managing challenges posed by global trade dynamics and evolving geopolitical landscapes. Through continued reforms and investment in technology and human capital, India is setting itself up as a crucial player in the global economy’s future.