Evolution of India's government debt market: challenges and opportunities

Kakali Kanjilal

International Journal of Indian Culture and Business Management, 2013, vol. 7, issue 4, 572-588

Abstract: Existence of well-developed government (govt.) debt market is critical for investors, market participants and policy makers. Administered interest rates, artificially low coupon rates were some of the dominant features of the market until 1990. Starting 1992, Reserve Bank of India (RBI) has taken several reform initiatives to build a vibrant liquid, competitive and integrated govt. debt market with the purpose of: 1) providing a benchmark yield curve whose information content could guide policymakers and investors; 2) making transmission mechanism of monetary policy impulses effective; 3) making a constant source of government borrowing to finance the fiscal deficit. Over the past two decades, the govt. debt market has demonstrated a steady improvement in terms of liquidity and infrastructure enhancements which should convince the investors that it does not function under the manipulation of RBI. The study by Kanjilal (2011) shows that movements in govt. debt market are still a reflection of RBI's policy change. Separation of 'debt management' from 'monetary management', widening both domestic and foreign investors' base and consolidation of regulatory bodies are some vital steps to make govt. debt market globally competitive.

Keywords: debt management; financial reforms; government debt market; monetary policy; RBI; Reserve Bank of India; yield curve; government borrowing. (search for similar items in EconPapers)
Date: 2013
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