Bailey, who has not featured in the Rams' first-team squad this season, joined the League One club on a three-month deal.
The 24-year-old needs regular games having made just two senior starts for Clough's side since January. Injuries combined with the form of Craig Bryson and Paul Coutts, and the emergence of academy products Jeff Hendrick and Will Hughes have seen Bailey slip down the pecking order in midfield.
"James has found himself outside the first-team matchday squad purely because of the form of those ahead of him and it is not a slight on his ability," said Clough.
"We think this is a great opportunity for him to go out and get a regular run of first-team football behind him. He has not had that for the last nine months or so and it will benefit him much more than playing for our Under-21 side every other week."
Bailey, who recently extended his contract by a further year until the summer of 2014, has made 62 appearances for Derby and scored one goal since he moved to Pride Park from Crewe in 2010.