World’s second-largest economy by 2038? Here’s what EY said about India

The world’s economic map could look very different by 2038, and India is right at the center of that shift.

According to EY’s latest Economy Watch report, India is on track to become the second-largest economy in the world by 2038, with a projected GDP of a staggering $34.2 trillion in purchasing power parity (PPP) terms.

This isn’t just a bold forecast, it’s a reflection of India’s momentum built on demographics, reforms, and resilience.

India’s Trillion-Dollar Rise

By 2030 itself, India’s GDP (PPP) is expected to cross $20.7 trillion, reinforcing its position among the fastest-growing major economies. But the real gamechanger comes eight years later, when India overtakes the US, Germany, and Japan to emerge as the world’s No. 2 economy, second only to China.

Why India Will Keep Growing

Several key factors are powering India’s rise. The country boasts a median age of 28.8 years in 2025, making it one of the youngest workforces globally. While China, Germany, Japan, and even the US are grappling with ageing populations and mounting debt, India’s youth bulge translates into a massive productive advantage.

On top of this, India enjoys the second-highest savings rate among large economies, ensuring consistent capital formation. And unlike peers where government debt is ballooning, India’s debt-to-GDP ratio is actually projected to fall from 81.3% in 2024 to 75.8% by 2030, a sign of sustainable fiscal management.

How Others Compare

China may still hold the crown with a projected $42.2 trillion GDP (PPP) by 2030, but its ageing workforce and rising debt levels are major headwinds. The US, while strong, faces debt exceeding 120% of GDP and slower growth. Germany and Japan are battling stagnation due to their older populations and reliance on exports.

Against this backdrop, India’s combination of youth, demand-driven growth, and reforms sets it apart as the most resilient growth story of the 21st century.

As DK Srivastava, Chief Policy Advisor at EY India, points out: “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 advancing capabilities in critical technologies, India is well-placed to move closer to its Viksit Bharat aspirations by 2047.”

The Long-Term Play

India’s rise isn’t just about demographics, it’s being reinforced by structural reforms like GST, IBC, and UPI, which are making business smoother and more inclusive. Production-linked incentives are encouraging manufacturing growth, while public investment in infrastructure is laying a strong foundation for the future.

Add to that India’s aggressive push into AI, semiconductors, and renewable energy, and it’s clear that the country is not just riding a demographic wave, it’s building long-term resilience.

Even global shocks like US tariffs, which may hit 0.9% of GDP, are expected to barely dent growth, with losses capped at just 0.1 percentage point thanks to diversification and domestic demand.

The Road Ahead

By 2028, India is projected to overtake Germany to become the third-largest economy in market exchange rate terms. By 2038, it may climb even higher, rewriting the global economic order.

If the EY projections play out, one thing is clear: India is not just catching up, it’s defining the future of global growth.