The Economic Survey 2024-25 highlights a significant disparity between India's rapidly growing equity market and its underdeveloped debt market. While corporate bond issuances increased to ₹7.3 lakh crore between April and December 2024, the overall size of the corporate bond market remains small, at only 18% of India's GDP. This contrasts sharply with other countries like Korea (80%) and China (36%).
The survey notes that a majority of funds are raised through private placements, limiting retail investor participation. In FY24, public placement of corporate bonds was a mere ₹19,000 crore compared to ₹8,38,000 crore in private placements. Further, most borrowing is concentrated among top-rated firms (AAA, AA+, and AA), accounting for 97% of issuances. This restricts access for smaller, higher-risk borrowers.
The survey concludes that addressing these issues is crucial for attracting greater liquidity into the corporate bond market.
Chief Economic Advisor V. Anantha Nageswaran during a press conference on Economic Survey 2024-25, in New Delhi on Friday. | Photo Credit: ANI
India’s equity market has rapidly grown particularly after the pandemic, but its debt market remains undercapitalised, according to the Economic Survey for 2024-25 tabled in Parliament on Friday.
Corporate bond issuances in India for the period April to December 2024 rose to ₹7.3 lakh crore, with an average monthly issuance of ₹0.8 lakh crore as against ₹0.66 lakh crore during the same period the earlier year. Still, the size of India’s corporate bond market stands at just 18% of the country’s total GDP as against 80% in Korea and 36% in China, the Survey noted. A majority of these funds were gathered by firms through private placements, thus deterring the participation of retail investors. “In FY24, the public placement of corporate bonds stood at ₹19,000 crore against the private placement of around ₹8,38,000 crore,” the Survey found.
Most of the borrowing in the bond market was done only by borrowers with the highest credit ratings. About 97% of corporate bond issuances came from firms with the top-three highest ratings (AAA, AA+, and AA), the Survey noted. It further mentioned that this could be the reason why most borrowers in the bond market are NBFCs and PSUs.
“If liquidity has to enter corporate bond markets, problems such as entry costs, information asymmetry, and the absence of a secondary market must be addressed,” the Survey pointed out.
Published - February 01, 2025 01:41 am IST
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