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India market and business update: April 2024

11 April 2024
India's embrace of sustainable finance is revolutionising its financial landscape and driving economic growth, whilst championing environmental stewardship and social progress. Through initiatives such as green bonds, sustainability-linked loans, and inclusive investment policies, the nation leads the charge towards a greener, more resilient future.

As outlined in our February update, India has reaffirmed its pledge to attain net-zero emissions by 2070, which has garnered substantial interest from international investors. This commitment, viewed as a cornerstone of sustainable economic development, has sparked a surge of investment into the country. Commentators have coined the exponential growth in this sector as "Green is the new gold"

Sustainable Finance in India

India's Embrace of Sustainable Finance

Globally, green bonds are poised to maintain their dominance in international markets, with projected growth in the broader green, social, sustainable, and sustainability-linked (GSS+) bond market to reach between £750 billion and £850 billion in 2024.

India has already capitalised on this growth by issuing its highly successful inaugural tranches of sovereign green bonds in 2023, presenting a significant opportunity to develop India's sustainable finance capabilities for the future. This can be seen at the Indian state level, with Gujarat issuing Asia's first certified green municipal bond in March 2024, raising 1 billion rupees to build and enhance essential green-hydro projects across the state. Additionally, the Asia-Pacific region now accounts for 25% of the global GSS+ bond market, marking its highest-ever percentage. This highlights India's significant impact on the region and the potential for future growth helping to achieve its wider Sustainable Development Goals (SDGs).

Emergence of the Indian Bond Market

The Indian bond market has emerged as the favoured method of fundraising for Indian companies in FY24, even amidst the backdrop of equities witnessing a historic rise. Privately placed corporate bonds have facilitated an exponential increase in funding, marking a remarkable 15% increase compared to FY23. This increase is largely attributed to their cost-effectiveness in comparison to equities and signals a positive outlook for the remainder of FY24.

A growing Indian bond market is advantageous for the progression of green bonds as it leads to greater investor confidence in the product and diversifies the investor base by attracting an influx of foreign investment. The Reserve Bank of India (RBI) is currently consulting on expanding the participation of non-residents in Sovereign Green Bonds, allowing eligible foreign investors in the International Financial Services Centre (IFSC) to invest. This initiative stands as a powerful testament to India's recognition of the value and significance of sustainable finance, anticipated to emerge as one of the primary strategies in India's ambitious journey towards achieving its SDGs in the forthcoming decades.

Sustainable Finance to a Greener Future

India stands at a pivotal crossroads, ripe for transformative action. Despite the ambitious and challenging goals that lie ahead, its inherent characteristics and economic prowess position it to lead an all-encompassing shift towards sustainability, fuelled by its commitment to sustainable finance. With bold strides and unwavering determination, India is primed to inspire and drive a future where sustainability reigns supreme.

DWF is a leading legal adviser to Indian and India-focussed companies, financial institutions and high net worth individuals and families. Our India Group, consisting of over 76 lawyers from 9 countries, 13 practice areas and 9 sector groups, is one of the largest India groups of any international law firm located outside India.  With decades of extensive expertise in guiding Indian clients in respect of outbound legal work, our team of experts and specialists empower both India-focused and India-based clients to achieve their strategic objectives.  While we do not practice Indian law as per the country’s current regulatory framework, we have strong relationships with leading Indian law firms with whom we collaborate to provide a seamless service to our clients.  If you have queries on any of the issues covered in this article, please contact one of our experts.

With thanks to Gurdev Riyat and Ambika Sharma for their contributions.

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