NITI Aayog Releases Report on “Deepening the Corporate Bond Market in India”

A ₹53.6 Trillion Market, but Still Behind Peers: The Unfinished Story of India’s Corporate Bonds

In FY2025, outstanding corporate bonds in India reached ₹53.6 trillion, a threefold increase from ₹17.5 trillion in FY2015, growing at an annual rate of approximately 12%. Yet, despite this impressive trajectory, the corporate bond market remains only 15–16% of GDP, a figure dwarfed by countries like South Korea, where corporate bonds account for over 80%. This paradox—stellar growth yet persistent underperformance—frames the core tension of NITI Aayog's new report, "Deepening the Corporate Bond Market in India." Released on December 13, 2025, the report is as much a reflection of unrealized potential as it is a roadmap for structural reform.

Breaking the Pattern: Why This Report Attempts What Others Haven’t

The expansion of corporate bond fundraising, now nearing parity with bank credit levels, signals an overdue shift toward market-based financing in India. But NITI Aayog's report aims to move beyond incremental growth. It positions the corporate bond market as a linchpin for achieving Viksit Bharat 2047 aspirations—a $30 trillion economy powered by long-term, low-cost capital for infrastructure, climate-centric projects, and emerging sectors. This framing is ambitious but refreshingly concrete, challenging the piecemeal regulatory measures of the past.

Key reforms overseen by SEBI, RBI, and the government have set some groundwork. For instance, SEBI’s electronic bond trading platform and the RBI’s tri-party repo mechanism signal a shift toward transparency and technological modernization. Yet, before this report, there has been no unified institutional approach, no cross-sectoral vision like this one. The corporate bond market’s relative neglect compared to equity markets—a USD 4.8 trillion stock market vs. USD 642 billion bond market—demonstrates the underlying imbalance NITI Aayog seeks to redress.

The Institutional Machinery: Piecemeal Reforms vs. Systemic Change

Behind the numbers lies disjointed institutional machinery. Regulatory fragmentation persists, with SEBI, RBI, and the government navigating overlapping jurisdictions, adding compliance costs and procedural delays. SEBI’s introduction of the Request for Quote (RFQ) platform has improved electronic trading, but secondary market liquidity remains “shallow.” RBI’s attempts to bolster settlement and clearing mechanisms do not yet translate to active market-making, a critical enabler found in mature ecosystems like South Korea’s.

Structural issues further constrain the market: issuer concentration remains skewed towards top-rated corporates, leaving MSMEs and mid-sized firms sidelined. Investor pools rely heavily on institutional players—insurance and pension funds—while retail and foreign portfolio investors (FPIs) are conspicuously missing. Tax asymmetries and inefficient debt-recovery systems compound these challenges, hampering broader participation.

The Ground Reality vs. The ₹100 Trillion Target

The government’s roadmap projects that the corporate bond market could exceed ₹100–120 trillion by 2030, pushing closer to ₹1.4 trillion in dollar terms. But achieving this depends on more than just ambitious numbers. NITI Aayog’s optimism about “deep structural reforms and capacity-building” runs headlong into India’s uneven state-level implementation record. For example, while national policies promote green bonds and sustainability-linked instruments, state-level infrastructure projects still disproportionately depend on bank credit and public funds.

Moreover, the supposed advantages of corporate bonds—like stable, long-tenor financing—are undercut by shallow secondary markets. Despite pushing electronic trading, India’s bond market trails behind South Korea in liquidity, where active market makers create depth essential for price discovery. South Korea's unified regulatory infrastructure stands in sharp contrast to India’s fragmented approach, underlining how institutional consolidation enhances investor confidence.

The Uncomfortable Questions the Report Doesn’t Answer

Skepticism is warranted when assessing whether NITI Aayog’s roadmap can resolve these bottlenecks. Unified regulation—a cornerstone of global success stories like Singapore—remains elusive in India, with SEBI and RBI often at odds. No mention is made of rationalizing jurisdictional overlaps despite these being flagged in multiple legislative reports and committee discussions.

Another glaring silence is around political economy dynamics. Bond markets, unlike equity markets, require stable mid-to-long-term macroeconomic policies. Yet India’s fiscal policy—shaped by election cycles and competing priorities—injects volatility that undermines investor confidence in long-tenor instruments. Will tokenized bonds and other digital innovations mentioned in the roadmap solve this deeper structural issue? That’s unclear.

Finally, there’s the question of fragmentation in retail participation. Online bond platforms may help but are unlikely to address systemic issues of low financial literacy among retail investors. Without targeted campaigns for investor education, digital access risks becoming nominal rather than transformational.

The South Korea Model: A Comparative Foundation

South Korea's bond market—valued at 80% of GDP—provides a pointed contrast. The country prioritized a unified regulatory architecture, cutting through institutional complexities that plague India’s system. Strong secondary markets, supported by active repo facilities and market-making, ensure liquidity even for mid-sized issuers. India’s reliance on private placements (90% of transactions) remains a stark deviation, limiting visibility and pricing efficiency. Using South Korea’s template, India must aggressively pursue secondary-market reforms, moving beyond token electronic platforms toward substantive liquidity measures.

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