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India’s PPP Growth
Context:
An EY report projects that India could become the world’s 2nd largest economy by 2038 in PPP terms, with GDP at $34.2 trillion.
Purchasing Power Parity (PPP):
- A method of comparing the economic productivity and standards of living between countries by adjusting for differences in price levels.
- In PPP terms, goods and services are priced identically across countries, neutralizing exchange rate fluctuations.
India’s PPP Position (Current):
- According to the World Bank International Comparison Program (ICP) 2017, India is already the 3rd largest economy in PPP terms, after China and the USA.
- India’s share in world PPP-based GDP: 6.7%.
Report Highlights (EY Economy Watch, 2025):
- By 2030: India’s PPP economy could reach $20.7 trillion.
- By 2038: Expected to become the 2nd largest, at $34.2 trillion GDP.
- India’s fundamentals:
- High savings & investment rates.
- Favorable demographics (youth dividend).
- Sustainable fiscal position.
- Adverse impact of higher US tariffs on Indian imports can be limited to 10 basis points of GDP growth through countermeasures.
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