Top government thinktank Niti Aayog on Thursday suggested a phased strategy to double the size of India’s corporate bond market to Rs 100-120 lakh crore by 2030 by focusing on tax harmonisation, regulatory simplification, digital infrastructure, expanded issuer and investor bases, diversified instruments and deeper risk-management markets.
In a comprehensive report, it said building a liquid, efficient, and globally competitive corporate bond market is key to achieving a $30 trillion economy to become a developed nation by 2047.
Phased Tax & Regulatory Overhaul
It said India’s corporate bond market needs targeted tax harmonisation to compete with equities and G-secs and to position bonds as long-term wealth-building tools. It suggested extending Section 80C (Income Tax) benefits to corporate bonds or creating a new Section 80CCF-like window, offering withholding tax relief for foreign investors, and equalising capital gains treatment across equities, debt funds and bonds with a uniform 12.5% LTCG rate plus indexation.
Additionally, the government could extend tiered interest-income exemptions, a one-time 10% tax credit for first-time investors, Corporate Bond Savings Accounts, aligning TDS on securitised debt instruments to 10%, extending REIT/InvIT tax deferrals, and granting targeted exemptions for municipal bonds.
Another priority is strengthening the legal and regulatory framework by harmonising norms across SEBI, RBI and MCA, reducing disclosure timelines, and creating a unified market development authority. Streamlined issuance—especially for lower-rated and mid-sized firms—along with stronger bankruptcy and resolution mechanisms will improve credit certainty and expand the investible universe.
To ease market friction, India must upgrade market infrastructure, including a single consolidated corporate bond database, deeper settlement systems, and active market-making frameworks.
Expanding Issuers, Investors, and Product Innovation
A major thrust must be on broadening the issuer base. Dedicated SME bond platforms, credit enhancement mechanisms, and fiscal incentives can help bring mid-sized firms and infrastructure SPVs into the market. Parallelly, product innovation—including covered bonds, long-tenor infrastructure bonds, ESG instruments, and ladder funds—will expand investor choice and deepen duration.
To unlock demand, investor participation must be expanded by easing rigid investment caps for insurance and pension funds, improving retail access through digital platforms and low-denomination bonds, and providing targeted tax reliefs, it said.
“India’s journey toward the vision of Viksit Bharat requires a robust and diversified financial ecosystem capable of mobilising long-term capital at scale. This report underscores how a deeper and more efficient corporate bond market will be central to enabling that transition by expanding market access, improving liquidity, and strengthening investor participation,” Niti Aayog CEO B.V.R. Subrahmanyam said.