Letter to BS: Deepening of corporate bonds will stabilise market

This refers to “Signs of maturing bond market” (July 3). India’s economy is slowing, inflation is breathing hard and the central bank is cutting interest rates. But the cost of long-term money is refusing to budge. What could be troubling the market is the unknown quantum of public spending via borrowings, which are but sovereign liabilities, beyond the Rs 7 trillion fiscal gap.

This highlights the need for deepening of Indian corporate bonds to meet the funding requirement of the infrastructure sector, particularly by insurance companies and pension funds. Despite interest-rate cuts, the 10-year Indian government bond yield was at 7.4 per cent till recently, only to slip to sub-7 per cent now. Banking sector and bond markets reforms were soft-pedalled when the global economy was in a better shape. But the Trump-disruption era, of uncertain duration, is upon us and the finance ministry needs to be pro-active.

R Narayanan,  Navi Mumbai

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