India’s economy is projected to reach USD 20.7 trillion (PPP) by 2030, with the potential to become the world’s second-largest economy by 2038, hitting USD 34.2 trillion, according to a recent EY report. The study highlights that with effective policy measures, India can mitigate the adverse effects of higher US tariffs on select imports, keeping the drag on GDP growth to roughly 0.1 percentage point.
EY’s August 2025 edition of Economy Watch emphasises that India ranks among the most dynamic of the top five global economies, supported by strong savings and investment rates, favourable demographics, and a sustainable fiscal outlook. While China is expected to maintain the largest economy globally at USD 42.2 trillion (PPP) by 2030, its ageing population and growing debt present challenges. Similarly, the US faces slower growth and debt exceeding 120% of GDP, while Germany and Japan are constrained by older populations and reliance on global trade.
The report notes that measuring economies in purchasing power parity (PPP) terms offers a clearer perspective than market exchange rates. Based on IMF estimates, India’s GDP in FY25 stands at USD 14.2 trillion (PPP), approximately 3.6 times its size in nominal terms, already positioning it as the third-largest economy after the US and China. EY predicts that if India maintains an average growth rate of 6.5% from 2028 to 2030, compared to 2.1% for the US, it could surpass the US in PPP terms by 2038.
India’s competitive advantages lie in its young, skilled workforce, rising domestic demand, and prudent fiscal management. DK Srivastava, Chief Policy Advisor at EY India, remarked that India’s strong saving and investment rates, coupled with technological advancements and strategic resilience, position it well to achieve its long-term growth ambitions.
Even with potential US tariffs affecting nearly 0.9% of India’s GDP, the report notes that impacts can be minimized through export diversification, domestic market expansion, and strengthening trade partnerships. These measures are expected to keep any slowdown limited to just 0.1 percentage point, ensuring India’s economic momentum remains intact.
