India Set to Become Second-Largest Economy by 2038, Says EY Report

Aug 2025 : India’s economy is on a fast track to global dominance, with the latest EY Economy Watch report projecting a rise to $20.7 trillion by 2030 and potentially $34.2 trillion by 2038. The surge is fueled by strong fundamentals, demographic advantage, and sustained structural reforms.

Currently, India is the world’s fourth-largest economy with an estimated nominal GDP of $4.19 trillion. With a youthful population (median age 28.8 years), high savings and investment rates, and a steadily declining debt-to-GDP ratio—expected to fall from 81.3% in 2024 to 75.8% by 2030—India is poised to outpace major global economies. The report suggests the country could emerge as the second-largest economy within the next 13 years.

Comparatively, China is projected to achieve a GDP of $42.2 trillion (PPP) by 2030, but faces constraints from an ageing population and mounting debt. The U.S. continues to show resilience, though high public debt exceeding 120% of GDP and slower growth remain concerns. Germany and Japan, despite their advanced economies, grapple with demographic challenges and dependence on global trade.

India’s transformation is underpinned by structural reforms such as GST, the Insolvency and Bankruptcy Code, UPI-led financial inclusion, and Production-Linked Incentive schemes that are strengthening industrial competitiveness. According to EY, India will surpass Germany by 2028 to become the third-largest economy at market exchange rates.

Even external headwinds, like potential U.S. tariffs impacting 0.9% of GDP, are unlikely to derail momentum. Robust domestic demand and diversified exports are expected to restrict the slowdown to a minimal 0.1 percentage point.

With reform-driven growth and demographic strength, India is charting its path toward becoming a global economic powerhouse by the mid-21st century.