Crisil Predicts India's Corporate Bond Market To Double By 2030

India's corporate bond market is poised for significant growth over the next six years, driven by increased infrastructure bond issuances, according to a statement by Crisil Ratings on Monday. Crisil anticipates the outstanding size of India's corporate bond market to surge to Rs 100-120 lakh crore by FY30, a substantial increase from Rs 43 lakh crore in the previous fiscal year. 

The growth trajectory will be fueled by factors such as heightened capital expenditure in infrastructure, the appeal of the infrastructure sector for corporate bond investors, and the expansion of retail credit, stated Somasekhar Vemuri, Senior Director at Crisil Ratings.

Despite infrastructure currently constituting only 15 per cent of the annual corporate bond issuance volume, Crisil envisions that structural improvements, bolstered by various policy measures, will make infrastructure bond issuances more attractive to patient-capital investors like insurers and pension funds—integral participants in the bond market.

Corporate bonds are anticipated to fund a substantial portion of the foreseen capital expenditure. Despite robust growth in retail credit, it represents only 30 per cent of the gross domestic product (GDP), a figure significantly lower than the 54 per cent GDP contribution in the United States, as noted by Crisil. The bond market, forming a vital funding source for major non-banking financial companies (NBFCs) and constituting a third of the funding mix, is expected to play a crucial role in facilitating the flow of retail credit.

Furthermore, the recent Reserve Bank of India guidelines, which raised risk weights for certain consumer loans, are expected to drive non-bank lenders to incorporate more bonds into their funding mix. With the increasing financialisation of India's household savings portfolio and the growth of managed investments, Crisil estimates that assets in the managed investment segment will double to Rs 315 lakh crore by fiscal 2027.

The ongoing trend of financialisation is expected to continue beyond fiscal 2027, signaling a substantial shift in the investment landscape. This growth trajectory underscores the evolving dynamics of India's corporate bond market, with infrastructure bonds playing a pivotal role in attracting a diverse range of investors and supporting the broader economic expansion.