India’s Growth Outlook
India is set to emerge as the world’s second-largest economy in purchasing power parity (PPP) terms by 2038, with a projected GDP of $34.2 trillion, according to the latest EY Economy Watch report released in August 2025. The International Monetary Fund (IMF) projects that by 2030, India’s economy could reach $20.7 trillion (PPP), underscoring its position as one of the most dynamic among the global top five economies.
Fundamentals Driving Growth
The report highlights India’s favorable demographics, high savings and investment rates, and a sustainable fiscal position as key factors underpinning long-term growth. With a median age of 28.8 years in 2025, India enjoys one of the youngest workforces globally. Its government debt-to-GDP ratio, projected to decline from 81.3% in 2024 to 75.8% by 2030, contrasts with rising debt levels in other major economies.
Comparing Global Peers
While China is projected to remain the world’s largest economy at $42.2 trillion (PPP) by 2030, its ageing population and mounting debt are major concerns. The US continues to post strong output but struggles with debt levels exceeding 120% of GDP and slower growth rates. Advanced economies such as Germany and Japan face the dual challenge of high median ages and dependence on global trade. India, however, combines youthful demographics, rising domestic demand, and fiscal resilience, placing it in a uniquely advantageous position.
Policy Reforms and Resilience
Structural reforms such as the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code (IBC), digital financial inclusion via UPI, and production-linked incentive schemes are bolstering India’s competitiveness. Public investment in infrastructure, coupled with adoption of emerging technologies like AI, semiconductors, and renewable energy, is creating a foundation for sustained growth.
Expert View
“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,” said DK Srivastava, Chief Policy Advisor at EY India. “By building resilience and advancing capabilities in critical technologies, India is well-placed to move closer to its Viksit Bharat aspirations by 2047.”
Near-Term Projections
EY also noted that India is likely to overtake Germany to become the third-largest economy in market exchange rate terms by 2028. While global trade tensions, including US tariffs, could affect 0.9% of India’s GDP, the impact on annual growth is estimated at just 0.1 percentage point. With export diversification, stronger domestic demand, and deeper trade partnerships, India is positioned to cushion these external shocks.
