Every mature market economy in the world has active commodity futures trading, either on domestic exchanges or offshore exchanges. Every successful agricultural economy in the world involves an intimate role for commodity futures. As India grows into a mature market economy, we have to learn how these markets function, and build commensurate legal and institutional structures. When faced with difficulties, the correct response is to diagnose and solve problems, not retreat into 1970s style economic policy.

In addition, banning futures exchanges will merely send this business underground and overseas. For many decades, while the GOI thought that futures trading was banned, it was actually flourishing in a “number 2 market”. In addition, hawala money is used all over India to do trading on offshore exchanges. As an example, a full range of commodity futures are traded in London, where they are regulated by the Financial Services Authority (FSA) — one of the most respected financial regulators in the world. The London financial sector will be the one to rejoice if India goes back to the control raj.

The writer is senior fellow at the National Institute of Public Finance and Policy, New Delhi