India's Debt Market: The Key to Viksit Bharat?

India's ambition to become a $30-trillion economy by 2047 hinges on the significant expansion of its debt capital market, as the banking system alone cannot meet the projected funding needs. Crisil estimates that India's non-sovereign debt will need to grow substantially by 2047 to support economic growth.

India Inc. is projected to require Rs 130-140 trillion in debt funding between FY27 and FY31. This highlights the imperative for corporate bonds, securitization, and municipal bonds to play a more significant role in financing the nation's development. Currently, the debt capital market's share is considerably smaller than bank credit.

The existing corporate bond market faces constraints, including a narrow issuer base and limited investor participation, with a heavy concentration in AAA and AA ratings. Enhancing secondary market liquidity and encouraging investment across a wider rating spectrum are crucial for market deepening.

To foster this growth, Crisil recommends regulatory reforms to stimulate investment in lower-rated corporate bonds, development of a covered bond market, government support for securitization, and increased use of municipal bonds for urban infrastructure projects. These measures are vital for aligning the savings landscape with the funding requirements of critical sectors under the Viksit Bharat vision.