Corporate bond market must expand for Viksit Bharat 2047: NITI Aayog

NITI Aayog, in its latest report, has emphasised the urgent need to strengthen India’s corporate bond market, calling it a critical pillar for achieving the country’s long-term economic vision of Viksit Bharat @ 2047. As India targets becoming a USD 30 trillion economy by 2047–2050, the report warns that the traditional reliance on bank credit and equity funding will fall short of meeting massive financing requirements across infrastructure, MSMEs, and emerging technology sectors.

Despite steady expansion, India’s corporate bond market remains significantly underdeveloped. Outstanding corporate bonds rose from ₹17.5 trillion in FY15 to ₹53.6 trillion in FY25, yet they represent only 14% of GDP far below South Korea (79%), Malaysia (54%) and Thailand (27%). Issuance volumes have consistently stayed below 1% of GDP for over a decade, compared to 5–7.5% in the U.S. and 3.5% in China. India also accounts for just 3% of the global corporate bond market, while the U.S. and China dominate more than half.

The report highlights a stark structural imbalance: as of March 2025, India’s corporate bond market stood at USD 642 billion, whereas equity markets reached USD 4.8 trillion nearly seven times larger.

NITI Aayog identified multiple constraints hampering market depth, particularly institutional limitations faced by insurance and pension funds, which are bound by strict credit-rating mandates. Their preference for AA-rated securities restricts capital flow to infrastructure SPVs, NBFCs, and mid-sized corporates. Retail participation also remains negligible, largely due to the dominance of private placements, which make up 98% of issuances and are typically inaccessible to small investors.

Secondary market activity is further constrained by a buy-and-hold strategy among large institutional players, coupled with high transaction costs and complex regulatory procedures that deter frequent trading.

However, NITI Aayog noted that coordinated reforms by the Government of India, RBI, and SEBI are beginning to reshape the market. SEBI has streamlined approval and disclosure frameworks to reduce issuance timelines, while the RBI has taken steps to widen institutional participation, strengthen settlement systems—particularly Delivery-versus-Payment (DVP) and support repo and derivatives markets crucial for hedging and liquidity.

The government has also introduced key safety mechanisms, including the Corporate Debt Market Development Fund (CDMDF) for market stability during stress and the Guarantee Scheme for Corporate Debt (GSCD) to reduce risks for investors in lower-rated bonds. Under AMRUT 2.0, grants of ₹26 crore for first-time municipal issuers and ₹20 crore for repeat green bond issuers aim to boost the urban debt market.

NITI Aayog said these combined measures mark a significant push toward deepening India’s corporate bond market and ensuring long-term financing for the nation’s development ambitions.