The analysis reveals that the WPI trend growth rate did accelerate in post-futures period in 14 of the 21 commodities. “But it was more of a rebound action as in 10 of these, there was a deceleration in the pre-futures period. It can be an outcome of a better price discovery too,” the report noted. In fact, the picture on volatility was fuzzy with the daily NCDEX data indicating a decline. “This makes the conclusion still more ambivalent,” it said, adding it could not be concluded emphatically whether futures trading fuelled volatility or price rise in agri commodities.
When contacted, Rajya Sabha member Sharad Joshi, who is also a member of the Sen committee, said, “Global high prices have become an excuse for crashing the futures market.” Joshi, who leads farmer organisation Shetkari Sanghatan and has maintained that farmers get better prices in the derivatives market, is already contemplating a dissent note to the report. The other members of the committee are Prakash Apte, IIM Bangalore, Siddharth Sinha, IIM Ahmedabad and Kewal Ram, member FMC.
The committee, set up in March 2007, has also indulged in subdued criticism of the Government on its policies to keep Inflation under check such as subsidies, agricultural imports and restriction on exports. Admitting that the government will not abandon these in favour of the futures market, it has finally got around to the view that now is not the best time to re-start futures in sensitive commodities.
Kewal Ram, member FMC and also the member-secretary to the Sen committee, said it was true that there were problems with the structure of contracts and regulation. “The FMC is still in the learning curve,” he said, however, adding that the futures market did translate demand-supply and other information into prices much faster. “To that extent, futures market do impact spot prices,” he added.
