New Delhi: India will need a far more robust and diversified financial system to meet its Viksit Bharat 2047 ambitions, and a deeper corporate bond market must be at the Centre of this transition, says a new Niti Aayog report that calls for sweeping reforms to expand long-term, low-cost financing.
The study, titled ‘Deepening the Corporate Bond Market in India’, underscores that India’s investment needs — ranging from infrastructure and industrial capacity to climate transition and emerging high-growth sectors — cannot be met sustainably without a bond market capable of mobilizing large pools of domestic and international capital.
The assessment notes that India’s corporate bond market has grown rapidly over the past decade, with outstanding issuances tripling from ₹17.5 trillion in FY15 to ₹53.6 trillion in FY25. Despite this expansion and a steady rise in market-based fundraising, corporate bonds still account for only 15-16% of GDP — well below levels seen in South Korea, China, Malaysia and other economies with mature financial systems.
The study, released on Thursday by Niti Aayog CEO BVR Subrahmanyam, highlights persistent structural constraints, including concentration of issuance among top-rated firms, heavy reliance on private placements, weak liquidity in secondary markets, limited risk appetite among institutional investors, and regulatory frictions that raise transaction costs and increase time to market.
According to the report, these gaps restrict access to affordable debt for mid-sized firms and MSMEs, inhibit financial inclusion, and limit the efficiency of India’s broader capital-allocation system. A deeper bond market is described as essential not only for diversifying funding avenues beyond the banking system but also for lowering borrowing costs, strengthening monetary policy transmission, and reducing systemic vulnerabilities from excessive reliance on bank credit.
Speaking at the launch, Subrahmanyam said, “India stands at an inflection point in its journey toward becoming a high-income economy by 2027. Achieving this vision will require a financial ecosystem capable of efficiently channeling long-term capital into productive sectors, fostering innovation, and sustaining inclusive growth.”
Behind Global Peers
While acknowledging major reforms introduced by Sebi, Reserve Bank of India and central government — such as electronic trading through the RFQ platform, streamlined issuance norms, introduction of tri-party repos, support for credit default swaps, and the push for InvITs, REITs and green bonds — the report concludes that the market continues to lag global peers on depth, diversity and liquidity. It stresses the need for more coherent regulation, simplified disclosure regimes, supportive investment norms for insurance and pension funds, stronger credit enhancement mechanisms, and more efficient resolution frameworks.
Benchmarking India against the United States, Singapore, South Korea and Thailand, the report notes that countries with vibrant bond markets have combined predictable regulation, active market-making, broad institutional participation and targeted fiscal incentives. These features, it argues, have enabled deeper liquidity, smoother price discovery, and wider access for smaller firms — elements that India must replicate to attract long-term investors and expand its issuer base.
The Niti Aayog CEO said, “While the banking sector has historically served as the backbone of India’s credit system, the next phase of our financial evolution depends critically on the deepening and diversification of capital markets, particularly the corporate bond market.”
The report lays out a sequenced reform roadmap, beginning with short-term priorities such as reducing procedural friction, enhancing coordination among regulators, strengthening digital market infrastructure, refining credit rating frameworks and expanding investor outreach.
Over the medium to long term, it calls for unified regulatory architecture, improved debt-recovery systems, scaled-up digital solutions for issuance and settlement, development of new asset classes, and integration of global investors through transparent and predictable rules.
Subrahmanyam said the recommendations offer a practical blueprint for widening India’s investor base, supporting lower-rated issuers, modernizing trading and settlement systems, and aligning Indian markets with global best practices.
With sustained policy focus, the report estimates that India’s corporate bond market can surpass ₹100-120 trillion by 2030, emerging as a key pillar of the country’s financial architecture.