India’s corporate bond market puzzle
Development of this market requires reforms in financial markets, public finance and regulatory governance
Banks and equity markets are the dominant sources of capital for business in India even as the corporate bond market has languished for decades now. This is a puzzle. Several committees have opined on how to fix this, yet little has changed. Today, corporate bonds are a $287 billion (about ₹ 19 trillion) market—around 14% of gross domestic product (GDP). This is large on an absolute basis but small compared to bank assets (89% of GDP) and equity markets (80% of GDP). In its current state, it is a market for highly rated, plain vanilla instruments, issued by financial firms and public sector enterprises. Also, issuance is fragmented and trading dries up within a few days of issuance.