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Size of the Indian Bond Market is US$ 2.29 trillion!

Writer # Indiabonds | March 5, 2021

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Yes – the Indian bond market is indeed worth ~US$ 2.29 trillion! That’s about INR 173,931,110,000,000

Global Sizing

The purpose of this article is to break the myth that bond markets are only for a select few or that they represent only a small proportion of financial markets in general. As of 2021, the world’s GDP was estimated to be US$96.1 trillion, world equity marketcap stood at US$124.4 trillion and the global bond market at US$126.9 trillion (Source: SIFMA).

The stats for the largest economy in the world are even more interesting. US GDP in 2021 was estimated to be US$23 trillion. It’s equity marketcap was at US$52.2 trillion (as in 2021) but it’s bond market was a whopping US$49.1 trillion! (as in 2021) (Source: SIFMA). Now we all know that these numbers on aggregate market sizing have only increased in 2020-21 due to the huge stimulus and liquidity injection by the US post Covid-19, whilst GDP has stalled.

Let’s take a look at these numbers for India. Estimates of GDP in 2021 stand at US$3.17 trillion with equity marketcap at almost the same number of US$3.48 trillion (as in 2022) (Source: BSE). As you already know, the Indian bond market stands at about US$2.29 trillion (as in 2022) (Source: CCIL). It is striking to observe that although the bond market in India is large, it has a large scope for an explosive growth from here.

Market Structure

The bond markets in India have matured significantly in the last ten years providing a relatively safe investment avenue for investors. The broad segments of the market are Central Government Securities (G-Sec), State Development Loans (SDL) and Corporate Bonds. Market depth in these securities has experienced consistent growth in terms of primary issuance as well as growing trading volumes in the secondary market.
RBI regulates G-secs, SDLs and money markets while SEBI regulates the Corporate bond market. If you were not already aware, you will be surprised to know that almost everyone is already indirectly an investor in the bond markets. This is because the largest institutional investors into bond markets are all the Insurance companies, pension funds and mutual funds. Apart from the domestic institutions, the other category of large investments come from FPIs (Foreign Portfolio Investors). Another aspect that is gradually growing is the retail and individual investment participation specifically in the corporate bond market. At IndiaBonds, it is our endeavour to accelerate this adoption by retail, as bond markets are not only large but also trusted by almost every type of institutional investor.

The Indian Context

Structurally, the debt market remains skewed towards government securities (G-secs). The domestic debt market in India amounts to about 74% of GDP while the size of India’s corporate bond market is a mere 17% of GDP. To put it into perspective, according to The Clearing Corporation Of India Ltd and SEBI, while the outstanding Government securities stock stands at Rs. 133.786 lakh crore (Mar’22), the outstanding corporate bonds are Rs. 40.17 lakh crore (Mar’22) (Source: CCIL and SEBI)

However, the entire bond market in India has grown at an impressive 13.60% CAGR (Compounded Annual Growth Rate) in the past 10 years. This is represented in the graph below:


Within the overall bond markets, our singular focus remains on the corporate bond market as it offers a wide variety of higher returns to individual investors. Furthermore, there has been a notable expansion in these markets in the last 10 years, where outstanding debt has grown at a CAGR of 14.34% from Rs 10.51 lakh crore to Rs 40.17 lakh crore during FY12-FY22. There has also been increased policy focus to develop and deepen the corporate bond markets given their growing importance and untapped potential. The government and regulators (SEBI and RBI) are taking measures to address the various issues that constrain the growth and development of the corporate bond markets.

Outlook for the future

The projected growth of India’s GDP to US$5 trillion in next few years is going to be funded largely by credit provided to corporations through the bond markets. We have already witnessed this in the western economies where the corporate bond market is a large percentage of GDP (upto 50-65% in some cases). As India transitions from a developing to a developed economy, sophistication and depth of its financial markets hold the key to economic upliftment.
Households that transfer their huge savings to investments, and in this case to a safer asset class of corporate bonds will likely spur an exponential growth of corporate bonds and provide the funding for India’s credit story. It is our effort at IndiaBonds to be a catalyst of this growth and make bond investments easy for individuals. Currently bond markets are big – however, they are only going to get bigger! Don’t get left behind….