unique features of commodity market in india
Post on 09-Sep-2014
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Historical BackgroundStarted as early as 1875, with the setting up
of "Bombay Cotton Trade Association Ltd." Futures trading in oilseeds was organized inIndia for the first time with the setting up of Gujarati Vyapari Mandali in 1900, which carried on futures trading in groundnut , castor seed and cotton Futures trading in Raw Jute and Jute Goods beganin Calcutta with the establishment of the Calcutta Hessian Exchange Ltd., in1919. Later East Indian Jute Association
Historical BackgroundAfter independence, the Constitution of India
brought the subject of "Stock Exchanges and futures markets" in the Union list. As a result, the responsibility for regulation of commodity futures markets devolved on Govt. of India. The era of widespread shortages in many essential commodities resulting in inflationary pressures and the tilt towards socialist policy, in which the role of market forces for resource allocation got diminished, saw the decline of this market since the mid-1960s. This coupled with the regulatory constraints in 1960s, resulted in virtual dismantling of the commodities future markets.
Historical Background Liberalization of Indian economy since 1991 recognised the
role of market and private initiative for the development of the economy. After some halting efforts since 1994 when Prof. K.N. Kabra Committee submitted its report, the late 1990s spilling into the new millennium, saw some bold initiatives in the commodity market. 1) Basmati Rice
2) Cotton and Kapas 3) Raw Jute and Jute Goods 4) Groundnut , rapeseed/mustard seed , cottonseed , sesame seed , sunflower seed , safflower seed , copra and soybean , and oils and oilcakes of all of them. 5) Rice bran oil 6) Castor oil and its oilcake 7) Linseed 8) Silver and 9) Onions.
Historical BackgroundThe year 2003 marked the real turning point
in the policy framework for commodity market when the government issued notifications for withdrawing all prohibitions and opening up forward trading in all the commodities
Which Commodities are suitable for Future Trading???The commodity should be competitive, i.e.,
there should be large demand for and supply of the commodity - no individual or group of persons acting in concert should be in a position to influence the demand or supply, and consequently the price substantially. There should be fluctuations in price. The market for the commodity should be free from substantial government control. The commodity should have long shelf life and be capable of standardisation and gradation.
Regulatory BodyThe Forward Markets Commission (FMC) The commission was set up under the
Forward Contracts (Regulation) Act of 1952 Responsible for regulating and promoting futures/forward trade in commodities Headquartered in Mumbai Regional office is located in Kolkata
Problems faced by Commodities Markets in IndiaProblems such as Octroi duty Transportation Warehousing Restriction on inter-state movement
Range of Products