NITI Aayog unveils roadmap to deepen India's corporate bond market

The NITI Aayog has released a comprehensive report outlining a roadmap to deepen the corporate bond market in India, providing both short-term and long-term strategies.

The report comes at a time when interest and volumes in the bond market are gaining significant traction, with 2025 already witnessing robust activity.

Currently, India's bond market stands at 16% of its gross domestic product (GDP), and the report puts forth measures to substantially increase this by 2030 and 2047, aligning with the 'Viksit Bharat' vision.

The report identifies several key challenges hindering the market's growth. A primary concern is the shallow secondary market, which suffers from low liquidity and a lack of price transparency.

Another significant issue is the concentration of investors, with an over-reliance on banks and limited participation from micro, small and medium enterprises (MSMEs), retail investors, and foreign portfolio investors (FPIs).

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Furthermore, the report highlights regulatory hurdles, including overlapping rules, complex disclosure requirements, and procedural delays that need to be addressed. It also points to investor constraints, where existing norms limit institutional exposure to lower-rated bonds, and weak, inefficient debt recovery mechanisms.

To tackle these issues, the NITI Aayog has proposed a multi-pronged reform agenda. This includes strengthening market infrastructure by developing single databases, improving settlement systems, and actively using digital tools for market-making.

The report suggests broadening the investor base by introducing benefits and incentives, particularly for first-time investors.

On the regulatory front, the proposals include creating unified market authorities and simplifying issuance processes to enhance efficiency.

The roadmap also calls for the innovation of new financial instruments to cater to diverse investor needs and risk appetites. Finally, it emphasises the need to strengthen the legal framework by improving debt recovery processes and bankruptcy resolution mechanisms.

The timing of the report is considered opportune, as markets anticipate that recent growth numbers could potentially double by the end of 2026.

Also Read | NSE’s Ashish Chauhan says India must build a strong bond market for long-term growth

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