Trump Tariffs, India Becomes 2nd-Largest Economy by 2038, EY Says

Instead of facing major challenges, such as President Trump's 50% tariffs on Indian exports, India is projected to become the world’s second-largest economy by 2038.

According to a report by EY, India's GDP is expected to reach $34.2 trillion in purchasing power parity (PPP) by 2038, positioning the country in front of other global powers like China, the US, Germany and Japan.

Impact of Trump Tariffs on India's Growth

The report, which was released just a day after the tariffs came into effect, highlighted that India’s resilience and economic potential. While the United States’ steep tariffs, targeting India’s exports, could impact up to 0.9% of India’s GDP, EY estimates that the growth impact will be minimal, only reducing the GDP growth by 0.1 percentage points.

India’s strategy to diversify exports and boost domestic demand can offset much of the adverse effects.

India’s Economic Strengths

Strong fundamentals, including a young & skilled workforce, a high savings and investment rate and a sustainable fiscal position, drive India’s growing economy.

As per the EY report, India’s median age in 2025 will be 28.8 years, which is much younger than its global counterparts, providing a distinct advantage for long-term growth. 

This demographic factor and India’s rising domestic demand are expected to move its economic growth despite global crisis.

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Positive Fiscal Outlook for India

The report also noted that India’s fiscal position is strengthening, with its government debt-to-GDP ratio expected to decline from 81.3% in 2024 to 75.8% by 2030. These progressive reforms, like GST, the Insolvency and Bankruptcy Code (IBC) and the expansion of financial inclusion, boost the country's competitiveness.

Infrastructure and Technology: Key Growth Drivers

In addition, the Indian government’s concentration on infrastructure investment & coming up with technologies like AI, semiconductors and renewable energy is laying the groundwork for future economic strength.

The country's growing infrastructure and tech sectors will be important in its continued progress towards its aim to becoming a developed nation by the year 2047.

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India’s Path to Becoming a Global Leader

India’s economy is expected to hit $20.7 trillion (PPP) by 2030 and its strong economic trajectory could overtake China in the upcoming decades.

This proves India’s ability to adapt and boom in the face of global challenges, positioning it as a global economic leader by 2038.