India’s economic growth story continues to capture global attention, with a new report by EY projecting that the country is on track to become the world’s second-largest economy by 2038. This growth trajectory, if realised, will see India surpassing the United States in terms of purchasing power parity (PPP), an achievement that would cement its place as a global economic powerhouse.

India’s GDP Growth Projections

According to EY’s Economy Watch report, India’s GDP in PPP terms is estimated to reach Rs. 18,13,94,100 crore (US$ 20.7 trillion) by 2030 and expand further to Rs. 29,96,94,600 crore (US$ 34.2 trillion) by 2038. At present, India is already the third-largest economy in PPP terms, valued at Rs. 12,44,34,600 crore (US$ 14.2 trillion) in FY25.

This makes India’s GDP in PPP terms nearly 3.6 times larger than its GDP at market exchange rates, highlighting the domestic demand-driven resilience of the Indian economy. By 2028, India is also projected to surpass Germany to become the third-largest economy in market exchange rate terms, moving a step closer to overtaking the US.

Growth Drivers Behind India’s Economic Strength

EY’s report emphasises that India’s long-term fundamentals are solid, driven by:

1. High savings and investment rates – India continues to see strong capital formation, with domestic savings playing a crucial role in infrastructure and industrial development.

2. Favourable demographics – With a young and dynamic workforce, India enjoys a demographic dividend that few major economies can match.

3. Sustainable fiscal position – Despite short-term global shocks, India has managed to maintain fiscal discipline, creating confidence among investors.

4. Technological advancements – India’s growing strength in modern technologies, including digital payments, IT services, AI, and clean energy, has placed it at the forefront of innovation.

Challenges from Global Tariffs and Trade Pressures

While the growth outlook remains positive, the report warns of challenges. The United States’ decision to impose a 50% tariff on Indian exports is a significant hurdle. Effective August 27, 2025, the tariffs cover over Rs. 4,20,624 crore (US$ 48 billion) worth of Indian exports, including:

• Textiles

• Gems and jewellery

• Shrimp and seafood

• Leather products

• Chemicals and machinery

EY estimates that nearly 0.9% of India’s GDP may be exposed to these tariffs. However, the actual impact may be lower, around 0.3%, if one-third of the tariff exposure translates into reduced demand. Furthermore, with domestic demand stimulation and reduced import dependence, the negative impact could be contained to as little as 0.1% (10 basis points).

India’s Viksit Bharat Vision 2047

Even with these global headwinds, EY projects that India’s medium-term growth will remain robust at 6.4–6.5%, in line with the nation’s long-term Viksit Bharat 2047 vision. This initiative envisions India transforming into a developed economy by its centenary of independence.

The emphasis on infrastructure expansion, manufacturing growth, digital innovation, and clean energy adoption will be key enablers of this transformation. Moreover, India’s strategic partnerships with nations such as Japan, the European Union, and ASEAN countries will strengthen its trade networks and economic resilience.

India’s Path to Becoming a Global Economic Superpower

The projection of India becoming the world’s second-largest economy by 2038 signifies a paradigm shift in the global economic order. With China holding the top position, India overtaking the US would reshape trade flows, investment strategies, and global alliances.

This shift will not only enhance India’s geopolitical clout but also provide opportunities for domestic businesses and startups to expand internationally. Sectors such as renewable energy, AI, defence, and space technology are expected to play pivotal roles in sustaining this momentum.

Conclusion

India’s economic journey reflects a balance of resilience, innovation, and opportunity. Despite global challenges such as tariffs and trade restrictions, the country’s long-term fundamentals remain robust. By 2038, India is poised to become the world’s second-largest economy, reshaping the global order and reaffirming its role as one of the fastest-growing major economies.

This milestone will mark not just a statistical achievement but a transformative leap towards Viksit Bharat 2047, with India standing as a global leader in growth, technology, and sustainable development.

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