“The era of easy money, which was there from 2008 onwards, has resulted in high inflation in 2022 and 2023 and has resulted in a very expensive stock market, almost reaching the highs before the tech bubble burst in March 2000,” Nageswaran said, speaking at the press conference on the Economic Survey 2025-26.
Cautioning about current market risks, he said these are being amplified by the dominance of a handful of very large companies and a shift in global financial flows away from banks towards relatively less regulated non-bank sources.
The comments come at a time when global equity markets, particularly technology stocks, continue to trade at elevated valuations despite persistent geopolitical tensions and uneven economic recovery.
The Economic Survey flagged that concentration risk has increased meaningfully, with a small set of companies accounting for a disproportionate share of market cap and returns.
On the global markets, it noted that artificial intelligence-linked stocks have driven the bulk of gains in major global indices since late 2022, raising concerns about inflated valuations and vulnerability to sharp corrections.
Nageswaran also drew attention to the sharp rally in precious metals, suggesting it reflects more than just short-term geopolitical uncertainty. “Gold is not only responding to global uncertainty but also question marks arising out of the store of value of fiat currencies around the world,” he said.The survey observed that gold and silver touched lifetime highs during 2025, supported by a weaker US dollar, expectations of negative real interest rates and heightened geopolitical and financial risks. On domestic exchanges, silver futures crossed Rs 4 lakh per kg, while gold scaled fresh all-time highs, underscoring strong safe-haven demand.
The broader message of the survey is that prolonged uncertainty can have lasting effects on financial markets and the real economy. It highlighted research showing that uncertainty often leads investors and companies to delay decisions, raising financing costs and slowing capital formation. Over time, this can result in sharper market corrections and even financial contagion across asset classes.
Against this backdrop, the survey called for India to strengthen its long-term capital markets and reduce the economy’s dependence on bank-led financing. It suggested a coordinated push to diversify funding sources, including steps to rationalise the tax treatment of debt instruments, which are currently taxed at an individual’s marginal income tax rate.
In contrast, equity investments benefit from lower capital gains tax rates, creating a bias that hurts liquidity in the debt market.
The survey also recommended measures such as credit enhancement facilities for lower-rated borrowers and a review of investment guidelines for long-term funds, arguing that these reforms could help lower the cost of capital and support infrastructure and climate-related financing.