NITI Aayog urges rapid expansion of corporate bond market to fuel Viksit Bharat vision

NITI Aayog has raised a strong red flag on the current state of India’s corporate bond market, calling it a crucial piece in the country’s larger goal of achieving Viksit Bharat by 2047 . In its latest report, the think tank said India cannot depend only on bank lending and equity markets to fund its long-term development plans. As the country aims to become a USD 30 trillion economy by 2047–2050 , massive investments will be needed across infrastructure, MSMEs, and emerging technology sectors, far beyond what banks and equity markets alone can support.

The report shows that despite steady growth, India’s corporate bond market remains far smaller than global standards . Outstanding corporate bonds have expanded from Rs 17.5 trillion in FY15 to Rs 53.6 trillion in FY25 , but they still make up only 14% of India’s GDP . In contrast, the figure is 79% in South Korea , 54% in Malaysia , and 27% in Thailand . India’s annual bond issuance has been stuck below 1% of GDP for over a decade , compared with 5-7.5% in the United States and roughly 3.5% in China . Globally, India holds only 3% of the corporate bond market, while the US and China together account for more than half.

A major concern highlighted by NITI Aayog is the glaring imbalance between India’s equity market and its bond market. As of March 2025, the corporate bond market was valued at USD 642 billion , while the equity market touched USD 4.8 trillion , making it almost seven times larger. This imbalance, the report notes, limits long-term financing options for companies and increases the pressure on banks, which already carry a heavy lending burden.

The report also points to several internal constraints that have slowed the growth of the bond market. Large institutional investors such as insurance companies and pension funds face strict credit-rating rules, usually limiting them to AA-rated securities. This prevents them from investing in infrastructure SPVs, NBFCs, and mid-sized companies that often need long-term funds the most. Retail investors are also largely missing from the market because 98% of all corporate bond issuances happen through private placements, which ordinary investors cannot easily access. Liquidity remains a challenge as well, with most institutional investors following a buy-and-hold strategy, leaving very little trading activity in the secondary market. On top of this, high transaction costs and complex, repetitive documentation continue to discourage active participation.

However, the report acknowledges that recent reforms by the Government of India, the Reserve Bank of India (RBI), and the Securities and Exchange Board of India (SEBI) are beginning to reshape the landscape. SEBI has simplified approval and disclosure rules to make it easier and faster for companies to issue bonds. The RBI has introduced measures to improve settlement systems such as Delivery-versus-Payment (DVP) and has supported the development of repo and derivatives markets, which help improve liquidity and risk management. The government has also created safety nets, including the Corporate Debt Market Development Fund (CDMDF) and the Guarantee Scheme for Corporate Debt (GSCD) , which reduce risks for investors in lower-rated debt. Under AMRUT 2.0 , municipal bodies are being encouraged to issue bonds, with grants of Rs 26 crore for first-time issuers and Rs 20 crore for repeat green bonds, supporting the growth of urban debt markets.

In simpler terms, NITI Aayog is urging India to build a stronger, more accessible, and more balanced bond market so companies can secure the long-term funds needed for the next stage of economic growth. Strengthening this market, attracting both institutions and retail investors, and increasing liquidity will play a major role in helping India reach its Viksit Bharat 2047 goals.