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

Abstract

Commodity Futures were reintroduced a few years into the beginning of the millennia. 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 got 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 following 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. From 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 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

JEL Classification: Q02, C25