EVALUATION OF STATISTICAL TRENDS OF THE COST OF DEBT CAPITAL IN INDIA FOR ENERGY AND INFRASTRUCTURE PROJECTS

Abstract

Debt financing is a core component of energy and infrastructure finance in most countries of the world and has direct impact on project valuation, feasibility, and profitability. This work analyses openly available data from the last one decade on the costs of debt finance in India, focusing on two major instrument classes - bank loans and debt securities like bonds issued over the last one decade. Bank loan rate data from the Reserve Bank of India from 2014 to 2025 show that loan interest rates have ranged from 8.75 ± 1.33% per annum to 11.18 ± 0.88% per annum, depending on type of bank considered, with private sector bank interests showing the highest range of values. The analysis of 10-, 15-, 30- and 40-year government bonds as a form of debt security shows that the annualized bond yields have been 7.25 ± 0.80%, 7.36 ± 0.60%, 7.43 ± 0.55% and 7.18 ± 0.28% respectively. Thus, in general, the bond yields have been lower than the bank lending rates. Comparison with 10-year bond yield data from 14 economies shows that developed economies have typically had bond yields much lower than that for India and other developing markets, indicating that infrastructure finance is costlier to access in developing nations where most infrastructure build out is needed to support their development objectives.