India is emerging as one of the world’s most dynamic economies and has the potential to become the second-largest by 2038, with a USD 34.2 trillion GDP (Gross Domestic Product), despite global uncertainties and higher tariffs from the United States, according to an EY report. It said that India’s economy could reach USD 20.7 trillion in terms of purchasing power parity (PPP) by 2030.
India Can Limit Impact of US Tariffs
The report also stated that, with appropriate countermeasures, India can limit the adverse impact of higher US tariffs on selected Indian imports to approximately 10 basis points of real GDP growth.
Despite global uncertainties such as tariff pressures and slowing trade, India’s resilience stems from its reliance on domestic demand and increasing capabilities in modern technologies, it said.
"With suitable policies, the US tariff impact can be reduced to about 0.1 per cent of GDP, implying, at best, a reduction of 10 basis points in India’s expected growth of 6.5 per cent in FY2026. So, India’s average growth may be reduced at best to 6.4 per cent in the medium term on account of the US tariffs," the report said.
India Is Third Largest Economy
The IMF estimates India’s GDP in FY25 at PPP USD 14.2 trillion — around 3.6 times larger than when measured in market exchange rate terms.
India is thus already the third-largest economy after China and the US.
"If beyond 2030, India and the US maintain average growth rates of 6.5 per cent and 2.1 per cent, respectively, during 2028–2030 (as per IMF forecasts), India may surpass the US economy in PPP terms by 2038," the report said.
India is also projected to become the third-largest economy in market exchange rate terms by 2028, overtaking Germany.
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With PTI inputs
