Abstract—This study is a pioneering study on the factors influencing the corporate bond market in India. Important aims of this study are to trace the development of corporate bond markets in other countries, identify factors which have influenced its development and suggest policy reforms to enhance the development of corporate bond markets in India. Multivariate regression analysis is used to analyze the factors that have influenced the development of the corporate bond markets in India. Our results show that while the growth of the government bond market has been a major positive influence in the development of the corporate bond markets in India, bank lending in India may have slowed the development of the corporate bond market. Other factors such as the size of the economy, openness, size of the stock market and institutional factors like corruption have had little or no impact on the development of the corporate bond market. Based on our study we suggest policy reforms to improve the corporate bond market in India. Suggested policy reforms includes improving the retail investment markets through issue of Swadeshi or patriotic bonds, encouraging forei gn participation by relaxing regulations and providing tax incentives, providing credit enhancements and introduction of new instruments such as credit default swaps and corporate repos.
Index Terms—Capital markets, corporate bond market, emerging markets, India.
S. Raghavan is with Dept. of Finance, Economics and Information System s, College of Business, Embry-Riddle Aeronautical, University (email: ragha8d6@er au.edu).
D. Sarwono is with College of Business, Embry-Riddle Aeronautical University.
Cite: Sunder Raghavan and Daniel Sarwono , "Corporate Bond Market in India: Lessons from Abroad and Road Ahead ," International Journal of Trade, Economics and Finance vol. 3, no. 2, pp. 120 -125, 2012.