Supply & demand side inhibitors in the development of an active municipal bond market in India

In the coming decades, rapid urbanization will become an opportunity as well as a challenge to the country's effort to sustain expeditious inclusive growth of any economy. Growing urbanization demands better quality of infrastructure services to urban populations. The urban infrastructure sector is playing an important role in the structural transformation of the economic system, including social development, India is not an exception. The adequate and timely supply of infrastructure finance needed to meet increasing demand for infrastructure services. Since Urban Local Bodies (ULBs) are found insufficient resources for the growing need of infrastructure investment, ULBs have to look for alternative sources for financing the infrastructure needs. Municipal bond has emerged as viable alternatives for accessing capital markets for ULBs to finance urban infrastructure. The municipal bond market in India is merely alive; however, due to several constraints that has not shown much progress in the past few years. In this context, the study seeks to examine the municipal bond market and investigates supply and demand inhibitors, which holds municipal bond financing wave in India till date.