With the Union Budget just around the corner, the Ministry of Finance has released the Economic Survey for 2025/26, in which it has issued a warning on ‘highly-leveraged’ AI infrastructure, which, upon failing, could have a cascading effect on global markets, potentially leading to an economic crisis worse than the 2008 Financial Crisis.
The survey, which has highlighted three potential market scenarios that could play out globally in 2026, has given a 10-20% possibility of a systemic shock where financial, technological and geopolitical stresses could amplify each other and have a cascading effect.
The survey particularly highlights the AI debt bomb, referring to a report that claims tech companies have moved over $120 billion in data centre spending off their balance sheets using Special Purpose Vehicles (SPVs) funded by Wall Street. This “off-balance sheet” could be a real echo of the structural vulnerabilities seen in 2008.
As such, the Economic Survey warns that the highly-leveraged AI infrastructure has already “exposed business models that are dependent on optimistic execution timelines, narrow customer concentration, and long-duration capital commitments.”
The survey adds that a correction in this segment may not only end technological adoption but could also tighten financial conditions. And the broader markets may have to bear the brunt of the spillover effect from this collapse.
Although the note does highlight only a 10-20% probability of this happening, it adds that the impact of this collapse could be similar to the 2008 global financial crisis, if not worse.
“While this remains a lower-probability scenario, its consequences would be significantly asymmetric. The macroeconomic consequences could be worse than those of the 2008 global financial crisis,” the note said.
However, it does add that India remains in a better position than most countries in the face of a potential collapse, thanks to its better positioning in the macroeconomic fundamentals.
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