The government needs to enhance the effectiveness of the insolvency framework, simplify tax structures for bonds, and ensure greater coordination between agencies to boost investor confidence in corporate debt, the Economic Survey for 2025-26 said on Thursday.
The regulators have taken several measures over the years to deepen the corporate bond market, but coordinated and phased reforms are needed to further strengthen it and lower the cost of credit for Indian companies, the survey said.
“As the market deepens, towards a potential ₹100-120 trillion by 2030, intermediation costs should decline, particularly for the mid-market segment, where much of India’s manufacturing capacity and job creation will emerge,” it said.
Realizing this vision demands sustained, coordinated policy focus, technological innovation, and regulatory harmonisation. However, financial deepening alone may not be sufficient to durably lower India’s cost of capital.
India’s corporate bond market is growing at an annual rate of around 12%, with FY25 seeing the highest-ever fresh issuances of ₹9.9 trillion.
While the Securities Exchange Board of India (Sebi) is the primary regulator for the corporate bond market, measures taken by the Reserve Bank of India for government bond market or for non-banking financial companies, in turn, have an impact on the corporate debt side.
“Long-term structural development should prioritize upgrading market infrastructure through unified trading platforms and enhanced market-making capabilities, while expanding the investor base through targeted incentives, including simplified tax structures for bonds and regulatory flexibility for pension funds and insurance companies to invest in mid-rated securities,” the survey said.
According to the survey, streamlining inter-agency alignment through joint circulars that clearly define responsibilities across the regulators, as well as establishing single-window contact systems for issuers would be helpful.
It also said that strengthening investor confidence in corporate debt requires enhancing the effectiveness of the insolvency framework so as to accelerate recovery timelines.
These measures will help in creating a vibrant corporate bond market, which can help lower the cost of capital for Indian companies through competitive pricing, improved liquidity, and efficient price discovery.
These measures are important, as India is far behind when compared with its global peers on the development of the corporate bond market. As of March 2025, this market accounted for 15-16% of the country’s gross domestic product (GDP). Meanwhile, South Korea’s corporate bond market is 79% of its GDP, in Malaysia, it is 54% and China at 38%.
This is because India’s debt market is skewed towards highly-rated borrowers such as AAA or AA-rated, which accounts for 85-90% of bond issuances. In contrast, the US presents a more liquid and mature corporate debt market catering to various segments. The US has less than 5% per cent of its bond issuances from AAA-rated categories, with over 60% in the A- and BBB-rated categories.
In India, with the dominance of private placements, public offerings remain limited, deterring access for small firms. The secondary market remains shallow, with India’s annual bond turnover ratio in secondary markets at 0.3, lower than that of Indonesia (1.17) and China (1.16).
