In the expected growth of India's corporate bond market over the next five to six years. Here are the key points:
Size of Outstanding Issuances: The outstanding size of India's corporate bond market is anticipated to more than double, reaching Rs 100-120 lakh crore by 2029-30, up from Rs 43 lakh crore in the previous fiscal year.
Infrastructure Spending: Large capital expenditures in the infrastructure and corporate sectors are expected to contribute to the growth.
Financial Savings: The rising trend of individuals opting for financial savings is also seen as a factor.
Regulatory Interventions: Government and regulatory initiatives, such as the backstop fund for the corporate bond market and AMC Repo Clearing Limited, are expected to support market development.
Compound Annual Growth Rate (CAGR): Over the past five financial years, the corporate bond market has shown a compound annual growth rate of 9%.
Regulatory Measures: The government and regulatory bodies like the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have taken steps to deepen the corporate bond market.
Expected Capital Expenditure: Capital expenditure in the infrastructure and corporate sectors is estimated to be around Rs 110 lakh crore in the period from FY23 to FY27, driven by high-capacity utilization, robust corporate balance sheets, and a positive economic growth outlook.
Role of Corporate Bonds in Financing: The corporate bond market is expected to finance a significant portion (one-sixth) of the forecasted capital expenditure.
Appeal of Infrastructure Bonds: Infrastructure bonds are gaining appeal due to improving credit risk profiles, recovery prospects, and their long-term nature. Currently, infrastructure accounts for only 15% of annual corporate bond issuances by volume.
Retail Credit Growth: Credit growth on the retail side is expected to remain strong, driven by private consumption growth and increased lending reach. The bond market is considered a crucial source of funds for larger non-banking financial companies (NBFCs).
Financialization of Savings: The rising financialization of household savings is expected to drive demand for capital market instruments like corporate bonds.
Challenges and Recommendations: The report suggests that regulatory bodies addressing key issues, such as relaxing investment restrictions on lower-rated corporate bonds for insurance and pension funds, could further boost market growth.
In conclusion, the text highlights the positive outlook for India's corporate bond market, driven by various factors such as infrastructure spending, regulatory support, and the increasing preference for financial savings.
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