The Economic Survey 2025–26 has urged the government to strengthen India’s corporate bond market by improving the efficiency of the insolvency framework, simplifying tax treatment for bonds, and enhancing coordination among regulatory bodies to build stronger investor confidence. While regulators have introduced multiple reforms over time to expand the corporate debt market, the Survey emphasises that further progress will require well-sequenced and collaborative policy measures to deepen the market and reduce borrowing costs for Indian businesses.
The Survey projects that as the corporate bond market expands to an estimated ₹100–120 trillion by 2030, intermediation expenses are expected to fall, particularly for mid-sized firms that are likely to drive manufacturing growth and employment generation. Achieving this goal, however, will require sustained policy attention, regulatory alignment, and adoption of new technologies. It also cautions that financial deepening alone may not permanently reduce the cost of capital.
Long-term reforms should focus on upgrading market infrastructure through integrated trading platforms and stronger market-making mechanisms. At the same time, the investor base must be broadened by offering targeted incentives, such as simpler bond taxation and greater flexibility for pension funds and insurance companies to invest in mid-rated securities.
The Survey also recommends better coordination among regulators through joint circulars that clearly outline responsibilities, along with single-window systems to assist issuers. These steps are critical, as India’s corporate bond market remains underdeveloped compared to global peers. As of March 2025, it accounted for only 15–16 percent of GDP, far below South Korea, Malaysia, and China. The market is heavily concentrated in highly rated issuances, limiting access for smaller firms and keeping secondary market liquidity weak.
