Overall Assessment
India's bond market is showing revitalized activity in 2025, marking a potential turning point after years of stagnation. However, it remains significantly underdeveloped compared to global standards and the domestic equity market.

Key Statistics and Current State

• Market Capitalization: The combined equity and bond market cap has grown from ~₹67 lakh crore in 2014 to ~₹475 lakh crore today, but virtually all growth is from equities. The bond market has stagnated or shrunk in relative terms.
• Recent Growth: Trading activity has surged since SEBI introduced the Online Bond Platform Providers (OBPP) framework. The NSE has seen trades per bond rise from ~100/year in 2022 to over 1,000/year in 2025, with total transactions crossing 10 lakh this year.
• Scale: Despite this growth, bond trading volume is still a tiny fraction of equity volumes.

Structural Challenges

1. Low Debt-to-GDP: India's ratio is far lower than major economies like the US and China, limiting the capacity to finance large-scale infrastructure.
2. Regulatory Complexity: Multiple regulators (PFRDA, RBI, IRDAI, SEBI) with differing rules create barriers to participation.
3. Liquidity & Market Making: Corporate bonds lack consistent buy-sell depth due to the absence of compulsory market making, a feature that boosted SME equities.
4. Taxation: Tax rules have become less favorable for bonds over the past decade.

Necessary Reforms and Outlook

• Policy Support: Simplifying cross-regulator rules and revisiting tax policies are critical to attract domestic institutions (pension funds, insurance companies).
• Market Making: Introducing mandatory market makers by 2026 is seen as a key step to improve liquidity.
• New Instruments: The NSE has applied to launch corporate and government bond index futures to create tertiary liquidity and improve market efficiency.

Conclusion
While 2025 shows promising signs of life, building a robust bond market is essential for India to fund its long-term infrastructure, energy transition, and social security needs. Concerted policy action is required to translate early activity into a deep and liquid market.