In a bid to tackle food inflation, Sebi suspended futures trading in key agri-commodities in 2021, later extending the ban till end-2023
New studies from Birla Institute and IIT Bombay found that ban did not lower wholesale or retail prices. Instead, the price gap widened, burdening farmer
The ban severely affected the market, with trading volumes dropping by over 70%, and daily turnover plummeting from Rs 2,000 cr to just Rs 300-400 cr
Futures trading helps hedge against price volatility, offering farmers a safety net by ensuring a fixed value for their produce, aiding in price discovery
Reports found that agri-commodity futures had no significant impact on spot prices. Inflationary pressures stem from supply-side problems & global price trends
While Sebi must address mkt manipulation, the ban itself has not achieved its goals. India should leverage derivatives mkts to protect against price risks