India conceiving to banish Food Futures Trading

What is the similarity between the final stages of the erstwhile NDA regime and the present UPA? Can you guess? It is nothing except the debacle in the economic front! While to the BJP-led NDA it was the crushing dream of India Shining, to the Congress-led and Left-backed UPA it is the soaring inflation and rising cost of food. In this regard it has been found that the Union Government is adamant to take stringent steps, if necessary, to save its kith and kin in this volatile political atmosphere. How? It is by the proscription of futures trading in food commodities. To a section of the government it is the most suitable way to handle the saga of towering inflation that has already become a major international concern.

Well, one of the main advocators of this strategy is the Union Finance Minister of India Shri Palaniappan Chidambaram. A recent report of The Financial Times clarified that the honorable minister himself was in favor of inflicting a blanket ban on trading in food futures. The report also clarified, according to the minister, governments across Asia were sharing his worries over conjectures in the international market of commodities. Shri Chidambaram also expressed the same view on the sidelines of the Asian Development Bank's annual meeting in Madrid where he pointed of India’s struggle with a grievous crisis on the food front.

However, it must be said, that India has already banished any form of futures trading in rice and wheat. The government is considering to apply the same schema to deal with the growing pressure at home to curb rising inflation. In this esteem, it is worthwhile to mention, that the official statistics in the week ending April 19 confirmed that India's inflation hit a 42-month high of 7.57%.

Speaking on this, especially on India’s intention of banning trading in food futures, Cameron Brandt, the global markets analyst at EPFR Global came out with his own views. He said, "It's indicative of the fact that there's a real issue here and governments are scrambling to find some kind of solution. I don't think it's a great idea especially given that their food futures market is fairly modest. If you take that away, you lose pretty important market signals. One thing the food futures market is telling us is plant more food." These views, more or less in same tone, were also presented by Divya Reddy, an analyst at the Eurasia Group and Arpitha Bykere, an analyst at RGE Monitor. To their assessments also forbiddance of futures trading in food commodities will prove futile.

To the appraisal of Divya Reddy the connection between commodities trading speculation and rising food prices is weak. Therefore the Indian approach will be nothing but a political gesture to hoodwink the populace, since the nation is on the verge of election. Furthermore, in spite of adopting several measures to check price rise and inflation India’s options are decreasing. Besides this process also indicates the governmental intervention at will and that may harm the cause of investment. On the contrary, Arpitha Bykere of RGE Monitor emphasized on the need of the apposite improvement of the rural infrastructure and agriculture investment. To her the Indian agriculture is a neglected lot although it employs sixty percent of the population. The need is to concentrate on increasing the investment in agriculture instead of banning futures trading in food commodities.

It should be noted that in the global spectrum eminent prices for agricultural commodities, especially corn, soyabeans and wheat, has given rise to popular disgruntlement. This has led the United Nations World Food Program to conclude that the pertinent food crisis, if not solved, may lead to the beginning of food hunger in countries.