The Hindu Business Line : Does futures trading really cause inflation?

New Delhi, April 23 The Government is unlikely to find any support from the Abhijit Sen panel in deciding whether to ban futures trading in agricultural commodities as an anti-inflation measure. The expert committee, headed by Planning Commission member Dr Abhijit Sen, will not make any specific recommendation regarding continuation or banning of futures trading in such commodities.

The committee was set up last year to study the impact of futures trading on commodity prices and suggest measures to minimise such impact.

“The evidence we have found is not unambiguous. Based on data that we have analysed, it is neither possible to say that futures trading in agricultural commodities leads to price rise in the spot market, nor it is possible to say that there is no impact,” Mr Sharad Joshi, member of the committee, told reporters here on Wednesday after the last meeting of the panel.

Dilemma

Explaining the dilemma the panel faced with regards to the data it had analysed, Dr Sen said, “It is virtually impossible to make any statement either this way or that way which would be acceptable to everyone.”

“We would not be giving any unanimous decision on this issue in the report,” he said.

“Since the terms of reference of the committee did not demand the panel to make any recommendation regarding banning of futures trading or not, the report will not go into it,” Dr Sen said. “The panel will submit a common minimum report (CMR) based on the terms of reference,” he said.

However, Mr Joshi pointed out that along with the report, members would individually give in writing their views on the entire issue. There had been differences of opinion among the members in their perception of the impact of futures prices on spot prices. This has led to the decision that the agreed points will be part of the common report while the differences would be submitted as individual views.

Asked whether the difference in opinion among the members had been sorted out, Dr Sen only said, “We have found an acceptable way of expressing any difference of opinion.”

In the individual reports, the members may or may not comment on ban on futures. But the Chairman, being the first among equals, in his capacity as a member, would probably comment on the issue of inflationary pressure generated because of futures trading, Mr Joshi said. “But it would not be a part of the common report,” he added.

The report would be submitted to the Minister for Consumer Affairs, Mr Sharad Pawar.

Apart from Dr Sen and Mr Joshi, other members include Mr Siddharth Sinha from IIM-Ahmedabad; Mr Prakash Apte from IIM-Bangalore; and Forward Markets Commission member Mr Kewal Ram. The issue of banning of futures in the wake of rising inflation had been raised by the Left parties. At their insistence, the Government had recently suspended futures trading in wheat, rice, tur and urad for an indefinite period.