Experts suggest the government to develop corporate bond market in India to boost financing for infrastructure projects in the country.
Even multilateral financial institutions like Asian Development Bank (ADB) have recognised the need to develop corporate bond market. The bank is supporting innovative pilot demonstration projects by providing partial credit guarantees as a means to enable take-out financing through the bond market.
This serves the double objective of freeing bank balance sheets to support greenfield projects while bond holders, who have a relatively lower tolerance for risk, provide financing of post-construction or brownfield projects, improving allocation of funding across the market.
Success indicators over the medium term on this front include the creation of project infrastructure bonds as an asset class in the Indian market and establishing a commercially-oriented guarantee fund to credit enhance bonds. ADB is also actively supporting the latter.
Further, in order to reduce interest rate in the economy, ADB suggests fiscal consolidation at the state and central level in India.
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