‘AI debt bomb’: Economic Survey warns of global crisis worse than 2008, here’s why

Survey flags off-balance-sheet AI infrastructure debt as a low-probability but high-impact risk, while arguing India’s macro buffers offer relative protection.

• India's Economic Survey warns of AI debt bomb risk worse than 2008 crisis
• Highly leveraged AI infrastructure could trigger asymmetric financial shocks
• India well-positioned with strong fundamentals, low AI debt exposure

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India’s Economic Survey for 2025-26 has issued a stark warning: a failure in highly leveraged AI infrastructure could trigger a global financial shock as severe as, or worse than, the 2008 crisis. While the probability is pegged at just 10–20 percent, the Survey says the fallout would be 'significantly asymmetric,' with cascading effects across markets, capital flows and the real economy.

The warning comes days ahead of the Union Budget, with policymakers signalling unease over how artificial intelligence is being financed globally, and who ultimately bears the risk.

The core risk: an ‘AI debt bomb’

At the heart of the concern is what the Survey calls an emerging 'AI debt bomb.' Citing a Financial Times report, it notes that global tech companies have shifted more than $120 billion of data centre spending off their balance sheets using special purpose vehicles (SPVs) funded by Wall Street investors.

These structures, the Survey argues, mirror the kind of opacity and leverage that amplified losses during the 2008 global financial crisis.

“The recent phase of highly leveraged AI-infrastructure investment has exposed business models that are dependent on optimistic execution timelines, narrow customer concentration, and long-duration capital commitments,” the Survey said.

In plain terms: the economics only work if demand scales fast, customers remain concentrated and funding stays cheap, a risky trifecta.

Three global scenarios for 2026

The Survey sketches three broad scenarios for the global economy in 2026.

The most likely outcome, assigned a 40-45 percent probability, is a fragile continuation of 2025, marked by volatility, trade frictions and frequent policy intervention but no systemic collapse.

A second scenario, also given a 40-45 percent probability, envisages a disorderly multipolar breakdown: intensified geopolitical rivalry, coercive trade, proliferating sanctions and weaker global shock absorbers.

The third, the most dangerous, carries a lower probability of 10–20 percent but the highest stakes.

When finance, tech and geopolitics collide

In this tail-risk scenario, financial stress from a correction in AI infrastructure coincides with geopolitical escalation or trade disruption. The interaction, the Survey warns, could tighten global liquidity sharply, weaken capital flows and force economies into defensive policy responses.

“A correction in this segment would not end technological adoption,” the Survey notes, “but it could tighten financial conditions, trigger risk aversion and spill over into broader capital markets.”

That combination, leveraged tech, geopolitics and fragile trade, is what could push the shock beyond 2008-style damage.

Early warning signals already flashing

The Survey points to several signals that markets are already pricing in fragility.

Gold prices surged through 2025, reflecting geopolitical risk, negative real interest rate expectations and financial tail risks. It also flags the sharp rise in Japanese government bond yields as another warning sign of stress in global financial plumbing.

Trade policy, meanwhile, is increasingly driven by security concerns rather than efficiency or multilateral rules, narrowing the margin for error when shocks hit.

Why India is relatively better placed

Despite the grim global outlook, the Survey argues that India enters this phase from a position of relative strength. Stronger macroeconomic fundamentals, healthier domestic demand and more limited exposure to leveraged AI financing structures offer insulation against a worst-case scenario.