Policy Reforms and Structural Breaks in India's Corporate Bond Market: Evidence from Chow Testing and ARIMA Forecasting

Abstract

India’s corporate bond market has grown steadily over the past decade, yet it remains shallow compared to the size of the economy and to other Asian markets. As of March 2024, outstanding corporate bonds totalled about ₹47 trillion, or 17 percent of GDP, with issuance and trading still concentrated in private placements and highly rated instruments. Earlier studies have documented reforms, market structure, and liquidity constraints, but few have provided econometric evidence on whether major policy interventions produced measurable shifts in the market’s trajectory. This study fills that gap by analysing quarterly data from 2010 to 2024 and testing whether reform episodes coincide with statistically significant structural breaks. Using Chow breakpoint tests alongside ARIMA modelling, the analysis compares the actual evolution of the market with the trajectory implied by historical dynamics. Results reveal three significant breaks 2013‑Q2, 2015‑Q1, and 2021‑Q1 with Chow F‑statistics of 44.91, 58.09, and 32.64 respectively, all significant at the 1 percent level. These breaks correspond to reforms that simplified issuance, enhanced transparency in primary‑market processes, and introduced post‑pandemic liquidity support. By linking India’s regulatory history to formal structural‑break evidence, the study shows that bond‑market deepening depends not only on policy activism but also on the credibility, design, and sequencing of reforms.