The ongoing and upcoming diversification of sources of debt capital across various layers of governmental structures and government-controlled companies is a welcome sign. It points to a rebalancing of market structures in the broader economy as well the financial functioning of the issuers. The state governments have increased their exposure to bonds in the past couple of years.
The government'’s broadening of the debt product base could, in turn, widen the investor base and create benchmarks for various issuances such as the InvITs, AIFs, and Muni bonds. States may even begin tapping the masala bond market.
The move could help iron out potential barriers to corporates broadly adopting these instruments.