The Emerging Markets Debt credit team makes annual visits to India, allowing us to monitor the country’s rapid development—by being present on the ground, witnessing visible changes, and listening to the sentiment expressed by residents and companies. During our most recent tour, we observed remarkable progress in the country’s efforts toward its goal of Swarnim Bharat (a term embodying India’s ambition to become a more prosperous, self-reliant and thriving nation). Conversations with local industry leaders and policymakers underscored a unified drive to achieve ambitious renewable energy targets and reduce dependence on imported fuels. In our view, the scale and speed of infrastructure upgrades, digital transformation and green finance initiatives demonstrate India’s determination to integrate economic growth with sustainable development.
Below, we highlight three key areas where our team’s conviction has grown the most.
Renewable Energy: Powering the Future Through Pumped Hydro Storage
According to data from India’s federal grid, India’s renewable energy sector is experiencing record growth, with output surging 24.4% to 134.43 billion kWh in the first half of 2025, hitting an all-time high of over 17% share of India’s total electricity output in June. India has also set an ambitious national target of 500 GW of non-fossil fuel capacity by 2030, up from the current 235.6 GW.1 The sector is attracting significant green finance, with major USD-denominated green bonds funding solar, wind and, most recently, pumped hydro storage power projects (PHSPs). By the end of 2024, India had issued a cumulative USD 55.9 billion in green, social, sustainability and sustainability-linked (GSS+) debt—a 186% increase since 2021. About 83% of this total was green debt, with most proceeds directed to clean energy and transport sectors. Sovereign green bonds have become a key vehicle, and, through 2024, the government has issued bonds worth INR 477 billion.2
During our trip, we visited one of the world’s largest GW-scale integrated renewable energy projects, which combines 4 GW of solar and 1 GW of wind power generation with 1.68 GW/10.08 GWh pumped hydro storage capacity. This plant can supply power for up to 12 hours of peak demand (at six hours per cycle). Its significance lies in its ability to solve a perennial challenge: storing excess renewable energy during peak generation and delivering reliable, clean power during peak demand—commonly known as round-the-clock supply—at a relatively low cost.
Two years ago, this site was a construction zone. In our visit, we were thrilled to see the reservoirs filled and turbines running during final test runs. India plans to develop more PHSPs, with 7.5 GW of new projects approved for 2024 – 25 and a pipeline of 22 GW for 2025 – 26. While these projects have longer gestation periods (three to four years) and high capital expenditure requirements, we believe rapid technological progress and growing familiarity among stakeholders will bring shorter development cycles and faster payback, increasing certainty for future profitability.
Alongside PHSP development, we met companies investing in green technologies, such as large-scale battery energy storage and domestic solar module and cell manufacturing. Although the renewable energy sector has not seen a significant number of credit-rating upgrades in recent months, we think the trend could change in a year or two as more renewable assets are commissioned and mature, translating into lower operational risks and, hence, a potentially lower risk premium in the capital markets. The sector’s access to financing has also broadened, with more IPOs of renewable energy companies in 2024. For credit investors, we believe the USD market will remain an attractive place to gain exposure to the sector, given the constant need for large-scale capital for expansion purposes.
India’s Non-Bank Financial Institutions: The Stars Align
India’s domestic loan growth of 9.8% in May 2025 is among the highest globally. Despite global trade uncertainty, our team forecasts robust growth for India: 6.5% for FY 2025 – 26 and 6.4% for FY 2026 – 27. Inflation has fallen sharply (we forecast 3.7% for FY 2026), boosting rural incomes and supporting consumption. We expect favorable weather to enhance agricultural yields and lower food prices.
In response to lower inflation, the Reserve Bank of India (RBI) has rapidly eased policy through rate cuts, liquidity injections and regulatory changes, aiming to quickly transmit lower rates and expand credit supply. The main beneficiaries are India’s Non-Bank Financial Institutions (NBFIs). NBFIs are essential to the country’s economic and social fabric, providing a wide range of financial services to segments that remain out of reach for traditional banks. Through microfinance, gold loans, affordable housing finance and Small and Medium Enterprise (SME) lending, NBFIs enable millions of low-income households, first-time entrepreneurs and small businesses to access credit. According to the RBI’s latest Financial Stability Report (FSR, published in June 2025), credit growth of NBFIs rose to 20.7% year-over-year in the financial year ending March 2025 from 16% in September 2024, significantly higher than that experienced by Indian commercial banks’ 11%. As of March 2025, NBFIs account for 84.3% of personal loans below INR 50,000 (about USD 584) and over 50% of the total credit outstanding to the microfinance sector.3 In a June report, Fitch Ratings noted that large private NBFIs have significantly increased their market share relative to smaller entities. These prominent NBFIs achieved a Compound Annual Growth Rate (CAGR) of 20% in loans from March 2022 to September 2024, outpacing the overall NBFI sector’s growth of 9%. Large NBFIs are also frequent issuers of USD bonds in the Asia Credit market.
NBFI Credit Is Expanding at a Rapid Pace
NBFI Growth in Total Advances (YoY%)
Source: Neuberger estimates, RBI Financial Stability Report 2025, June 2025.
During our recent trip, we gained a deeper appreciation for how NBFIs entrench their positions in rural and semi-urban communities, positioning them to benefit from India’s next phase of high growth. NBFIs’ extensive branch networks help bridge the financial inclusion gap, while their adoption of digital technologies and AI-driven risk models enables them to serve customers quickly and responsibly. Gold loans—a signature NBFI product—surged by 103% in 2025, in part due to soaring gold prices, with the sector holding more than INR 2.1 trillion (USD 25 billion) in gold-backed assets.4 Other major areas of NBFI credit growth include housing loans, education loans and vehicle/auto loans. By enabling access to finance, fostering entrepreneurship and supporting consumption growth, NBFIs not only drive economic expansion, but also deliver tangible social impact. In our view, their resilience—underpinned by strong capitalization, low non-performing loan ratios and a proactive regulator pursuing slower but higher-quality growth—suggests that this crucial segment will likely continue to underpin India’s development journey. According to RBI’s latest FSR, NBFIs’ gross non-performing asset (GNPA) ratio fell to 3.0% in March 2025 from 6.2% in 2022, reflecting improved risk management and regulatory oversight. Strong capitalization (the system-level capital adequacy ratio was 25.8% as of March 2025 per RBI’s FSR) and diversified funding sources have further strengthened the sector’s foundation. As a result, we believe the NBFI sector is on its strongest footing in years.
Indian NBFIs’ Credit Fundamentals Appear Robust
Source: Neuberger estimates, RBI Financial Stability Report 2025, June 2025.
Commodities Demand: Fueling Growth
Strong trends in infrastructure, construction and manufacturing are fueling robust demand for basic commodities, particularly aluminum and zinc. According to Hindalco, India’s largest aluminum downstream producer, domestic aluminum consumption has grown from 4.47 million tons in FY 2023 to 5.59 million tons in FY 20255—a growth rate that far surpasses global peers. The zinc market is witnessing similar momentum, with domestic demand growing by 13% in FY 2024 and estimated to grow an additional 7% in FY 2025.6 Leading producers are achieving record output and expanding capacity to meet this surge.
Given this positive demand backdrop, Indian commodity producers have delivered strong earnings and deleveraged effectively, resulting in multiple rating upgrades over the past year. A notable highlight from our trip was learning about a leading producer’s launch of Asia’s first low-carbon “green” zinc, designed for the growing demand for sustainable materials—especially in the automotive sector. The “green” zinc, produced using renewable energy, has a carbon footprint 75% lower than the global average, according to management. While metal companies have long been associated with pollution, we believe such innovation enhances the credibility of their decarbonization targets, especially when combined with their buoyant earnings outlook.
Conclusion
India is embarking on a pivotal phase in its development journey, marked by the ambition of Swarnim Bharat and the determination to become a developed nation by 2047. In our view, the convergence of strong economic growth, accelerating infrastructure and industrial transformation, and a flourishing green ecosystem creates a rare window of opportunity for global investors. The momentum we are witnessing—across renewable energy, non-bank financial institutions and commodities—is a testament to the growing dynamism of India’s corporate landscape. Notably, this year has seen 12 rating upgrade actions and no downgrades among Indian corporates, with an average of 91% of rated corporates on stable or positive rating outlook as of June 30, 2025.7 In our view, this wave of positive rating actions highlights the improving credit fundamentals and adds a compelling reason for investors to look beyond China in considering investment in Asian credit markets.
