India's bond market supports $8 trillion economic goal

India is aiming to become a $7-8 trillion economy within five years, with its bond market playing a key role in this growth. The bond market is currently valued at $2.69 trillion and includes significant contributions from corporate bonds, which are now worth over $602 billion. This shift towards debt-driven financing indicates that businesses are increasingly relying on bonds to support their operations. In the first nine months of the fiscal year 2024-25, India's total outstanding bonds grew by $100 billion. Despite a depreciation of the Indian Rupee, the overall bond market grew by 6.5% in rupee terms, while the corporate bond market experienced a stronger growth of 9%. This growth reflects a trend toward using fixed-income assets for investment, especially amid recent fluctuations in the equity markets. However, India's bond market still has room for improvement. It currently stands at 0.65 times the size of the equity market capitalization, which is lower than the 1.2 to 2.0 times seen in developed markets. Increased participation from investors indicates a growing interest in bonds as a safer investment option. As India works towards its ambitious economic goals, corporate bonds are expected to be vital for financing infrastructure and ensuring long-term stability. Investors and policymakers are paying close attention to how regulations will evolve to enhance the bond market's depth and liquidity in the coming years.