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Has Indian Commodity Future Market Lost Steam? Existing Scenario and the Way Forward


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1 National Institute of Financial Management and Young Professional, NITI Aayog, New Delhi, India
     

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Commodity futures were introduced a few years into the beginning of the millenium. After a healthy run, signs of corrections were seen in the Indian commodity markets in 2012. But, unearthing of the NSEL Spot Exchange scam of Rs 5,600 crore in July 2013 had disastrous consequences on the volume and value of trade. After the revelation of scam, turnover of the exchange reduced to almost 50% till February 2015. Though several measures were adopted by FMC to restore confidence among investors but there is mounting suspicion on whether the commodity futures market will be able to be as buoyant in its growth as before. The present paper chronicles the trends of Indian commodity markets by using past data of volume and value of trades of the commodity traded from 2003 till date. Further, the paper employs a qualitative method of inquiry (Delphi technique) to seek policy suggestions from experts in the area of Indian commodity markets. The analysis of the archived data on volume and value of trade indicates a downward facing trend, demonstrating the rapid need for reforms to salvage the commodity futures market. The second part lists the regulatory, legal, and operational issues identified by experts for the downfall of the market. The paper then presents the collated the opinions of several experts on areas which require immediate attention and novel policies which could improve the scenario.

Keywords

Commodity Markets, FMC, Delphi Technique, India.
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  • Has Indian Commodity Future Market Lost Steam? Existing Scenario and the Way Forward

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Authors

Tarun Kumar Soni
National Institute of Financial Management and Young Professional, NITI Aayog, New Delhi, India

Abstract


Commodity futures were introduced a few years into the beginning of the millenium. After a healthy run, signs of corrections were seen in the Indian commodity markets in 2012. But, unearthing of the NSEL Spot Exchange scam of Rs 5,600 crore in July 2013 had disastrous consequences on the volume and value of trade. After the revelation of scam, turnover of the exchange reduced to almost 50% till February 2015. Though several measures were adopted by FMC to restore confidence among investors but there is mounting suspicion on whether the commodity futures market will be able to be as buoyant in its growth as before. The present paper chronicles the trends of Indian commodity markets by using past data of volume and value of trades of the commodity traded from 2003 till date. Further, the paper employs a qualitative method of inquiry (Delphi technique) to seek policy suggestions from experts in the area of Indian commodity markets. The analysis of the archived data on volume and value of trade indicates a downward facing trend, demonstrating the rapid need for reforms to salvage the commodity futures market. The second part lists the regulatory, legal, and operational issues identified by experts for the downfall of the market. The paper then presents the collated the opinions of several experts on areas which require immediate attention and novel policies which could improve the scenario.

Keywords


Commodity Markets, FMC, Delphi Technique, India.

References