New Delhi [India], December 11 : NITI Aayog, in its recent report, underscored the urgent need to deepen India's corporate bond market, calling it a critical pillar of the country's long-term economic vision of Viksit Bharat @ 2047.
As India aspires to scale a USD 30 trillion economy by around 2047-2050, the report stresses that traditional reliance on bank lending and equity will be insufficient to meet massive funding needs across infrastructure, MSMEs, and emerging technology sectors.
India's corporate bond market remains underdeveloped despite steady growth, it said.
Outstanding corporate bonds have expanded from Rs 17.5 trillion in FY15 to Rs 53.6 trillion in FY25. Yet they account for only 14% of GDP, far below South Korea (79%), Malaysia (54%), and Thailand (27%), it added.
India's issuance volumes have also remained below 1% of GDP for more than a decade, compared with 5-7.5% in the US and about 3.5% in China.
NITI Aayog noted that India accounts for just 3% of the global corporate bond market, while the U.S. and China together account for more than half.
It highlighted a significant structural imbalance between India's equity and bond markets. As of March 2025, corporate bonds were valued at about USD 642 billion, while equity markets reached USD 4.8 trillion, nearly seven times larger, it said.
The report also highlighted several challenges in the corporate bond market.
The report highlights that institutional constraints, particularly for insurance and pension funds, are constricting market depth.
Many long-term investors face strict credit-rating mandates, typically limited to AA-rated securities, curbing allocations to infrastructure SPVs, NBFCs, and mid-sized corporate issuers, the report noted.
Despite several policy efforts, retail investors remain largely absent from the corporate bond market.
A key reason, the report notes, is the overwhelming dominance of private placements, which account for 98% of issuances and are typically inaccessible to retail buyers.
Another structural challenge highlighted is the buy-and-hold strategy followed by most institutional investors, which severely restricts secondary market activity.
High transaction costs and complex regulatory processes, including lengthy and repetitive documentation, further deter active market engagement.
Even amid this, NITI Aayog highlighted that a series of coordinated measures by the Government of India, the Reserve Bank of India (RBI), and the Securities and Exchange Board of India (SEBI) is beginning to reshape the market landscape.
SEBI has streamlined approval and disclosure processes to shorten issuance timelines and reduce compliance burdens.
The RBI has introduced measures to broaden institutional participation, enhance settlement systems, particularly Delivery-versus-Payment (DVP), and support complementary markets such as repo and derivatives, which are essential for hedging and liquidity.
The Government has rolled out strong safety nets, including the Corporate Debt Market Development Fund (CDMDF) to stabilise markets during stress and the Guarantee Scheme for Corporate Debt (GSCD) to lower risks for investors in lower-rated issuances.
Under AMRUT 2.0, municipal issuers receive grants of Rs 26 crore for first-time issuers and Rs 20 crore for repeat green bonds to encourage growth in the urban debt market.
Together, these reforms represent a coordinated effort to deepen India's bond market and support long-term financing for its growth ambitions.
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