Abstract
While India boasts a world-class equity market and increasingly important bank assets, its bond market has not kept up. The government bond market remains illiquid. The corporate bond market, in addition, remains restrictive to participants and largely arbitrage-driven. Securitization, which once had the jump on other Asian markets, has failed to take off. To meet the needs of its firms and investors, the bond market must therefore evolve. This will mean creating new market sectors such as exchange-traded interest rate and foreign exchange derivatives contracts. It will mean relaxing exchange restrictions, easing investment mandates on contractual savings institutions, reforming the stamp duty tax, and revamping disclosure requirements for corporate public offers. This paper reviews the development and outlook of the Indian bond market. It looks at the market participants - including life insurance, pension funds, mutual funds and foreign investors - and it discusses the importance to development of learning from the innovations and experiences of others.
Highlights
The Indian financial system is changing fast, marked by strong economic growth, more robust markets, and considerably greater efficiency
The government is required to produce a Medium Term Fiscal Policy Statement as part of the annual budget, in which it explains the sustainability of policies, how they are consistent with the Fiscal Responsibility and Budget Management Act (FRBM), and to make projections for the current and following 2 years
In December 2007 Securities and Exchange Board of India (SEBI) relaxed the requirement for bond issues to be rated by two agencies and the requirement that public issues must be of investment grade
Summary
The Indian financial system is changing fast, marked by strong economic growth, more robust markets, and considerably greater efficiency. To meet the needs of its firms and investors, the bond market must evolve This will mean creating new market sectors such as exchange traded interest rate and foreign exchange derivatives contracts. Streamlining the regulatory and supervisory structure of the local currency bond market could substantially increase efficiency, spurring innovation, economies of scale, liquidity and competition. Such reforms will help level the playing field for investors. By contrast, from the lessons of its neighbors in developing its corporate bond market This paper reviews these issues and discusses policies that can help further develop India’s debt market.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
