A Case for Developing the Municipal Bond Market in India
ASCI Journal of Management, Vol. 42, No. 1, pp. 1-19, 2012
19 Pages Posted: 25 Oct 2012
Date Written: October 1, 2012
As India rapidly urbanizes, urban governance and management in general, and meeting the financial needs of urban areas in particular, have acquired greater urgency. Sankhe et al. (2010: 15) have projected that by 2030, 590 million Indians will live in cities, more than double the corresponding number in 2001; 91 million urban households will be middle class with higher expectations of quality and quantity of urban amenities; 70 per cent of net new employment will be generated in cities; US$ 1.2 trillion in capital investments, equivalent to 69 per cent of India’s 2010 GDP, will be required to meet urban needs; 2.5 billion sq mt of roads will need to be paved, 20 times the capacity needed in the past decade; 7,400 km of metros and subways need to be constructed, 20 times the capacity added in the past decade; and affordable housing, schools, water, electricity and other amenities will be need to be provided to the rapidly expanding urban populace.
It is in the foregoing context that this paper analyzes the role of municipal bond markets in financing urban infrastructure and amenities. The next section briefly describes municipal bonds as an avenue for financing urban infrastructure. This is followed by an overview of the size and structure of the municipal bond market in India. The fourth section discusses the modalities of the municipal bond market, including the major supply-side and demand-side constraints that need to be addressed in developing the market. Thereafter, certain reform directions are suggested. The final section provides concluding remarks.
Keywords: municipal bonds, public finance, India
JEL Classification: G1, H6, H7
Suggested Citation: Suggested Citation