Rising public wealth in India is causing a major shift in its $1 trillion sovereign bond market.

Their savings through life insurance companies, provident funds and pension funds have increasingly been put into long-term debt, leading to a structural change in the cost of borrowing for Prime Minister Narendra Modi’s government.

HDFC Life Insurance Ltd said India’s yield curve flattened markedly as insurers and pension funds snapped up 10- to 40-year bonds as market participants asked the central bank to sell longer-dated bonds. Their expanding footprint means the country will reduce its reliance on banks over time, alleviating traders’ concerns about how Modi’s infrastructure-building spree will be financed.

The government will detail its borrowing plans for April-September this week, usually targeting 55-60% of its full-year target.

The change has been gradual, with insurers holding 26% of government bonds at the end of December, up from 22% in 2010, according to finance ministry data. Their presence, worth $19 billion by some estimates, overshadows purchases due to the widespread use of derivatives trading.

But their influence has grown at recent bond auctions for the fiscal year that ended in March, in which longer-dated bonds paid lower yields than shorter-dated bonds. Since 2017, the gap between the 10-year and two-year baseline has disappeared.

Market veterans were surprised when a Rs 14.2 lakh crore ($172 billion) borrowing programme passed without central bank backing. Insurance companies even snapped up bonds issued by the provinces.

That may please Modi, whose government will borrow a record Rs 15.4 lakh crore in the new fiscal year. New Delhi needs to find long-term investors for its bonds in an ambitious state-building program that includes 50 new airports, heliports and airfields.

Finance Minister Nirmala Sitharaman has proposed raising capital expenditure by more than a third to Rs 10 lakh crore in her February budget. She said the government had identified 100 new projects for so-called last-mile connections.

India is one of the fastest-growing insurance markets in the world. It is expected to become the sixth-largest insurer by 2032, according to a January report by global reinsurer Swiss Re. It said gross premiums would grow by an average of 14% yearly in nominal local currency over the next decade.

The size of pension funds also increased, another sector benefiting from increased financial sophistication. Assets under management by the National Pension System (NPS) rose 18% to Rs 8.5 lakh crore in the fiscal year to February.

One factor that has driven demand for longer-dated bonds over the past few years has been a boom in derivatives deals, known as bond forward rate agreements, between banks and insurers. The strategy helps insurers lock in long-term product yields, guaranteeing returns without taking on more debt on their balance sheets.

Potential headwinds include a tax on high-value insurance products starting in April, targeting an area popular with wealthy investors. Some companies, including Star Union Dai-ichi Life Insurance Ltd and ICICI Securities Primary Dealership Ltd, said the impact needed to be monitored.

Since Modi relies on debt markets to finance one of Asia’s largest budget deficits, investors must be mindful of government borrowing.

Still, after this fiscal year, India’s status as the world’s fastest-growing major economy will likely deepen its financial markets and bolster the coffers of its insurers and pension funds. That money has a ready home at the longer-dated end of the bond market.