India's Bond Market Remains Underdeveloped, Experts Urge Diversification of Savings: AK Mittal of Capital Services

India's Financial Markets: A Call to Deepen and Expand

At the India Fixed Income Summit, held on May 26, 2026, organized by CNBC-TV18 in association with IndiaBonds, AK Mittal, MD and CEO at AK Capital Services, addressed the pressing question of how to expand and deepen India's financial markets. In his presentation on the History of the Indian Bond Market & Way Forward, Mittal highlighted the disparity between India's economy and its corporate bond market.

India's economy stands at USD 3.95 trillion, dwarfed by the US's USD 31.86 trillion and China's USD 20.4 trillion. However, when it comes to corporate bonds, India's market is a mere USD 0.64 trillion, compared to USD 11.55 trillion in the US and USD 11.15 trillion in China. Furthermore, as a share of GDP, India's corporate bond market remains extremely small.

Mittal emphasized that the issue is not that India is borrowing too much, but rather that many entities with the capacity to borrow are not doing so. Productive borrowing is essential for market growth, and India's savings rate is another area of concern. China saves nearly 40 percent of GDP, while India's savings rate is lower. Moreover, a significant portion of India's savings flows into real estate and gold, rather than productive assets like bonds.

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To grow the market, financial products must extend beyond metro cities and penetrate deeper into rural areas. Debt distribution needs to expand, and savers must be encouraged to invest in bonds. However, with inflation rates around 4 percent and bank deposits offering around 5 percent before taxes and deductions, real gains remain limited. Mittal argued that the bond market can potentially provide better inflation-adjusted returns, and that investors should be able to directly participate in the market to improve efficiencies and make savings more productive.

Small and medium-sized enterprises (MSMEs) continue to face high borrowing costs, ranging from 12 percent to 20 percent or more, making growth difficult. Manufacturing requires capital, and efficient debt markets can support this need. To become a developed economy, India requires stronger savings mobilization and a broader bond market that reaches smaller towns and regions, not just large urban centers.