Last Updated : 23 December 2008 at 16:15 IST

No more ban on commodity futures: Minister

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Commodity Online
NEW DELHI: The Indian government will not hereafter impose any ban on futures trading in commodities as it has been proved that futures market has nothing to do with inflation in the country, Minister of State for Finance Pawan Kumar Bansal told the Parliament on Tuesday.

Bansal told the Rajya Sabha that the Expert Committee chaired by Professor Abhijit Sen, Member, Planning Commission, constituted by the Government in March 2007 to study the impact of futures trading on the prices of agricultural commodities has stated that in view of conflicting results from daily, as against weekly and monthly data, no strong conclusion can be drawn on whether introduction of futures trade is associated with decrease or increase in spot price volatility.

He said the Expert Committee also analyzed annual growth rate in prices of sensitive commodities (food grains and sugar) in pre- future period and post future period and concluded that although inflation clearly increased post-futures in some sensitive commodities that have higher weight in consumer price indices, it is not possible to make any general claim that inflation accelerated more in commodities with futures trading.

As on December 6, 2008, the inflation rate measured by the Wholesale Price Index stood at 6.84 percent, compared to 12.91 percent on August 2 2008.

"Futures trading in commodities in India does not appear to Lead to any flight of Indian currency abroad," the minister said.

As a matter of caution, the Forward Markets Commission (FMC) had suspended futures trading in tur, urad, Wheat and rice in 2007. Subsequently, the FMC had suspended futures trading in chana, soy oil, Potato and Rubber in May 2008, which was not extended beyond November 30, 2008.

"Since the Abhijit Sen Committee could not establish any definite causal relationship between futures trading and rise in prices of commodities, there is no proposal to ban futures trading in more commodities," Minister Bansal added.