Indian Bond Market: Structure, Conduct and Macroeconomic Impact

• ISBN13: 9789372264685
• Binding: Hardcover
• Subject: Business Management
• Publisher: Atlantic Publishers & Distributors (P) Ltd
• Publisher Imprint: Atlantic
• Publication Date: January 13, 2026
• Pages: 390
• Original Price: INR 995.0
• Language: English
• Edition: N/A
• Item Weight: 540 grams
• BISAC Subject(s): Corporate Finance / General, Investments & Securities / Bonds, and Economics / Macroeconomics

Indian Bond Market: Structure, Conduct and Macroeconomic Impact explores the Indian bond market not as an isolated financial segment, but as a reflection of broader economic conditions, underscoring its significance as a key indicator of macroeconomic health. It presents a rigorous, empirically grounded analysis of India's bond market with a comprehensive narrative of various fixed-income instruments. The central focus of this book is the impact of macroeconomic factors, such as monetary and fiscal policy, inflation, economic growth and external influences on bond market dynamics. The book aims to deepen readers' understanding of this crucial segment of the financial system, while fostering informed policy discourse among students, market practitioners and policymakers alike.

“The book fills a much-needed space in the domain of fixed income instruments and the analysis of bond markets…a valuable resource for students, researchers as well as retail investors looking to diversify their portfolio. A timely and relevant publication.”

—Dr Rajiv Kumar

Chairman, Pahlé India Foundation, New Delhi Former Vice Chairman, NITI Aayog

“…an exceptional analysis of India's government and corporate bond markets, their evolution, and policy linkages. It bridges empirical rigour with policy relevance, providing valuable insights for those shaping—and studying—the future of India's financial architecture.”

—Dr Arvind Mayaram

Former Finance Secretary, Government of India

“A sharp, market-savvy, data rich and insight-driven analysis of India's fast-evolving debt market…it blends rigorous analysis with real-world relevance—translating complex data into clear, actionable intelligence…the book empowers readers to read the signals, time the shifts, and seize opportunities…”

—Indranil Sen Gupta

Professor of Practice (Economics), Shiv Nadar University, Former Head of India Research, CLSA Former Co-Head of Research & Economist, Merrill Lynch, Bank of America,

“…This book offers a lucid and comprehensive account of the evolution of India's bond markets from administered finance to a market-driven system…Balanced in tone and rich in empirical evidence, it stands as a credible and timely contribution to the study of India's fixed-income landscape.”

—Tirthankar Patnaik, PhD

Chief Economist, National Stock Exchange of India Limited (NSE)

“This long-awaited volume fills a major gap in understanding India's fixed income securities markets…Accessible yet rigorous, the book serves both learners and practitioners—students, teachers, bankers, and policymakers alike…A landmark reference for scholars and professionals…”

—Prof Triptendu Prakash Ghosh

Associate Professor, Indian Institute of Foreign Trade (IIFT), Kolkata

Geetima Das Krishna, with over two decades of experience in research, policymaking, consulting and teaching, has made significant contributions in both the corporate world and academia. An engineer by training with an MBA in Finance & Investment, her PhD focuses on the influence of various macro parameters in the Fixed Income market. At Invest India, she led the Northeast and UTs team, driving investment promotion, facilitation and state capacity building through investor-friendly policies. She published several reports to enrich public debate and provide policy inputs as the lead of the macroeconomic research unit at the Centre for Policy Research. Additionally, she conducted focused macro research for the Fixed Income team at Reliance Mutual Fund, helping formulate investment strategies based on macroeconomic trends.

Biswajit Nag is a Professor of Economics and the Head of the Executive Management Programme Division at IIFT, New Delhi. With over 25 years of empirical research experience, he has taught across Europe, Africa and Asia, holding notable positions, such as Visiting Research Fellow at IDE, Japan, an ICCR Chair Professor in Ukraine, and Erasmus Mundus Visiting Professor. He is also a Non-Resident Fellow at Monash University and formerly served at UN-ESCAP. An advisor on Global Value Chains for ARTNet, he has authored books, published extensively and led major projects for government and international agencies, including contributing to India's Foreign Trade Policy 2023.

• Preface ............xiii
• Foreword ..............xvii
• List of Abbreviations ..........xxi
Chapter 1: The Fixed Income Market of India............1
• 1.1. The Role of Sovereign Bond Market............6
• 1.2. Structure of the Fixed Income (Bond) Market in India..............8
• 1.3. Institutional Background..........11
PART I EVOLUTION AND STRUCTURE OF THE INDIAN BOND MARKET Chapter 2: Evolution and Reforms in the Indian Bond Market ........................21
• 2.1. Government Bond Market (G-Secs) ............21
• 2.2. Corporate Bond Market ...........27
Chapter 3: Varieties of Bonds: Colours and Flavours ..........33
• 3.1. Various Interest Rate Bonds ....................33
• 3.2. Embedded Bonds...........34
• 3.3. Foreign Bonds..............35
• 3.4. Social Impact Bonds ............39
• 3.4.1. Green Bond ..............39
• 3.4.2. Rhino Bond.............43
Chapter 4: Stylised Facts about Indian Sovereign and Corporate Bond Markets ..........45
• 4.1. Government or Sovereign Market............45viii Indian Bond Market: Structure, Conduct and Macroeconomic Impact
• 4.1.1. Size and Liquidity .........45
• 4.1.2. Elongation of Maturity Profile ..........50
• 4.1.3. Ownership Pattern of the Government Securities ..........52
• 4.2. Corporate Bond Market in India..............58
• 4.2.1. Size of the Corporate Bond Market.......58
• 4.2.2. Corporate vs Government Debt Market..............59
• 4.2.3. Narrow Investor Base..................61
Chapter 5: Indian Corporate Bond Market and its Challenges ........................65
• 5.1. Corporate Bond Market: A Perspective.............65
• 5.2. Importance of Corporate Bond Market............67
• 5.3. Relatively Small Size of Corporate BondMarket in India ...................69
• 5.4. Challenges in Corporate Bond Market in India ........................71
• 5.4.1. Demand-Side Issues ............71
• 5.4.2. Supply-Side Issues..........79
• 5.5. Conclusion and Recommendations .............86
Chapter 6: Importance of State Government Bonds: State Development Loans (SDLs) ..................91
• 6.1. Stylised Facts about State GovernmentBonds ......................92
• 6.1.1. Fiscal Health .............92
• 6.1.2. Sources of Financing State Bonds (SDLs) .........95
• 6.1.3. Trend of Outstanding SDLs ..............98
• 6.1.4. Off-Budget Financing ..................99
• 6.2. Issues in SDL..............100
• 6.2.1. Narrow Investor Base ...........100
• 6.2.2. Lack of Liquidity..........101
• 6.2.3. Hardening of Yields ...................103
• 6.3. Impact of Various Political Announcements and Reforms .........104Contents ix
• 6.3.1. Impact of Farm Loan Waivers..............104
• 6.3.2. Impact of Pay Commission .............108
• 6.3.3. Impact of the UDAY Scheme .........111
• 6.3.4. GST and State Finances.............114
• 6.4. Impact of COVID ..............117
• 6.4.1. Triple Whammy for States due to COVID....................117
• 6.4.2. Policy Responses to States’ Financial Stress and Hardening SDL Yields........118
• 6.5. Risk Asymmetry in SDLs ..............120
• 6.6. Current Status of State-Level Debts ...........123
• 6.7. Way Forward..............128
Chapter 7: Growing Popularity of Municipal Bonds in India .........................131
• 7.1. Evolution of Municipal Bonds in India...........133
• 7.2. Municipal Bonds Issued by Few Cities in India ......................135
• 7.3. Why Municipality Bonds are Needed in India? .....................139
• 7.4. Challenges Faced by Urban Bodies and the Way Forward..........141
Chapter 8: Comparison of Bond Markets of Few Asian Economies vs India...........145
• 8.1. Size of Bond Market of Select Asian Economies ............146
• 8.2. Turnover in the Secondary Market in Asian Economies .........147
• 8.3. Foreign Holding in Government Bonds ........148
• 8.4. Investor Profile of Government Securities .....149
• 8.5. Conclusion ...........156
PART II A. SOVEREIGN BOND MARKET Chapter 9: Sovereign Bond Yields and Macro Factors.............163
• 9.1. Bond Price, Coupon Rate and Yield ..........163
• 9.2. What Moves the Yield.............164x Indian Bond Market: Structure, Conduct and Macroeconomic Impact
Chapter 10: Long-Run Determinants of Sovereign Bond Yields in India ..........171
• 10.1. Literature Review: Influence of Macro Variables on Long-Term Yields.............172
• 10.2. Theoretical Framework and Model for Government Bond Market ....................175
• 10.3. The Variables Considered and the Methodology..............178
• 10.4. Empirical Results.........182
• 10.5. Validation of the Output.........185
• 10.6. Policy Implications and Future Research Opportunities.............186
Chapter 11: Information Within the Slope of the Yield Curve ........................191
• 11.1. Classical Business Cycles, Growth Cycles and Growth Rate Cycles..........194
• 11.1.1. Leading, Coincident and Lagging Indicators of Business Cycles ..........197
• 11.1.2. Composite Index of Leading Indicators..........198
• 11.2. Literature Review..............199
• 11.2.1. Identifying Macro Indicators for Constructing CILI............199
• 11.2.2. Empirical Studies on Measuring Indian Business Cycles .........200
• 11.2.3. Predictive Ability of the Yield Curve..............205
• 11.3. Standard Methodology............208
• 11.3.1. Identifying Reference Series ............208
• 11.3.2. Determination of Turning Points.........211
• 11.3.3. Construction of CILI ...........211
• 11.3.4. Slope of The Yield Curve...........218
• 11.4. Empirical Results.........219
• 11.4.1. Reference Series...........219
• 11.4.2. The Lead Indicators and Construction of CILI ...........221Contents xi
• 11.4.3. Slope of the Yield Curve as Lead Indicator..................226
• 11.5. Predictive Ability of Slope of the Yield Curve .....................229
Chapter 12: The Factors of the Yield Curve and their Dynamics ........................231
• 12.1. Literature Reviews: Latent Factors of Yield Curve and Impact of Macroeconomic Parameters ............233
• 12.2. Data and Methodology...........236
• 12.2.1. Yield Data.........236
• 12.2.2. Other Data ..............238
• 12.3. Empirical Findings .............242
• 12.3.1. Yield Curve Factors Estimation............243
• 12.3.2. Correlation and Causality Analysis.....250
• 12.4. Interpreting the Empirical Results .............265
• 12.5. Conclusion ...........266
• B. CORPORATE BOND MARKET
Chapter 13: Determinants for Development of Corporate Bond Market ............271
• 13.1. Literature Review: Factors Determining Development of Corporate Bond Market.......272
• 13.2. Corporate Bond Market: Pre-conditions, Advantages and Risks..............277
• 13.3. Data and Methodology Used in the Study......279
• 13.4. Empirical Results.........284
• 13.4.1. Correlation Estimation..............284
• 13.4.2. Panel Regression..........284
• 13.5. Summarising: Variables for the Development of Corporate Bond Market.......292
Chapter 14: Implication for Financial Sector: An Empirical Analysis ..........................295
• 14.1. Theoretical Framework...........296
• 14.2. Literature Review: Government Expenditure and Corporate Borrowings.........298xii Indian Bond Market: Structure, Conduct and Macroeconomic Impact
• 14.3. Data and Methodology...........299
• 14.4. Empirical Results.........300
• 14.5. Implication of Large Government Bond Market on Financial Market ..................304
Chapter 15: Conclusion and Recommendations............309
• 15.1. Sovereign/Government Bond Market..............310
• 15.2. Corporate Bond Market..........312
• 15.3. Implication for Financial Market and Economic Growth.............315
• 15.4. State Government Debt and Fiscal Prudence..............318
• 15.5. Limitations and Future Research Directions .............319
• Appendices ..........................323
• Bibliography ........................337
• Index.........355