India is a land of extremes. Right alongside the remarkable success of a reforms effort on the equity market, we got a remarkable failure of a reforms effort on the bond market. Manish Sabharwal & Digant Bhansali have a fascinating article in Economic Times on the slow death of the government bond market in India. This table is in the article:
|Number of gilts traded > 4 times/week||27||14||9||6|
|Number of gilts that addup to 90% of volume||26||33||15||11||11|
|Volume of top traded security (%)||11||23||18||33||36|
|Share of NDS in volume (%)||0||0||53||79||84|
|Equity turnover (billion USD)||933||1051||1802||2564|
|Gilts turnover (billion USD)||365||216||164||221|
It's astonishing to notice that from 2003-04 to 2006-07, a time of remarkable GDP growth in India coupled with a massive scale of government bond issuance owing to large deficits, government bond turnover dropped from $365 billion to $221 billion. Over this same period, equities turnover went up from $933 billion to $2564 billion.
The state of the market is visible in the turnover of the biggest single bond - this went up from 11% of the market in 2003-04 to 36% in 2007-08.
This is the period over which RBI implemented the Negotiated Dealing System, their vision for how the bond market should be transformed.