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India's Bond Market Needs Policy Boost
19 Jan
Summary
- FPIs pulled Rs 1.65 lakh crore in 2025 amid external factors.
- Primary market saw record Rs 1.8 lakh crore from over 100 IPOs.
- Policy focus shifts to bond market deepening, not equity stimulus.
India's financial markets face a dichotomy, with secondary markets struggling due to external pressures and a significant FPI outflow of Rs 1.65 lakh crore in 2025. Meanwhile, the primary market experienced a record year in 2025, raising Rs 1.8 lakh crore from over 100 IPOs, buoyed by strong retail investor interest and upcoming large listings like Jio and NSE.
The government is navigating this landscape with the Union Budget approaching. While secondary market performance is expected to improve with easing trade tensions, the sustained FPI exodus remains a concern. Policy intervention is deemed more constructive for deepening the bond market, with proposals including reviving concessional tax treatment for certain debt investments under Section 194LD.
Stability is prioritized over stimulus for equity investors, maintaining the status quo on current tax rates. Discussions are ongoing regarding tax treatment for pension funds and potential reductions in transaction taxes, though fiscal room is constrained. The focus remains on enhancing India's appeal to FPIs through targeted policy fine-tuning, particularly in the bond market.
