New Delhi: The National Commodity and Derivative Exchange (NCDEX) on 30 April dismissed allegations that futures trading was causing high inflation in the country and said commodities not being traded contributed almost three times more to the wholesale price index than those traded.
“Pricing of commodities have gone up due to stagnant productivity and supply shortfalls and to blame commodity exchanges for inflation is misplaced accusation,” NCDEX managing director P.H. Ravikumar told reporters here.
Inflation contribution of commodities traded on the exchange was 0.3% while commodities not traded contributed 0.83% to the Wholesale Price Index (WPI), he said.
Ravikumar said the weightage of commodities not traded on the exchange in WPI was also higher at 2.63% than those traded at 2.06%.
NCDEX has highlighted these points in a representation to the Abhijit Sen Committee, which was set up to study the impact of futures trading on farm commodities, he said, adding it is a good indicator for government policy.
This is due to the fact that it helps in efficient price discovery, benchmark price and price stability, he said.
On the committee’s response, Ravikumar said: “Interaction was very positive. They appreciated that the impact of price discovery was reaching grass-roots level”.
Ravikumar pointed out that in periods before the credit policy was announced, money supply had gone up by 24% against the normal 16-18%, indicating that more money was chasing fewer goods.
Price rise in pulses was due to stagnation in production in the country, while the government did not have enough buffer stocks in wheat to release into the domestic market to check the spiralling prices, he said.
Food articles, with a weightage of 15.4% in WPI, contributed nearly 30% to the 6.7% inflation as of 3 February, Ravikumar said.
The State Trading Corporation, MMTC and Food Corporation of India should also participate in the commodity exchanges, he said.
Ravikumar said the shortfall in wheat procurement could be met through commodity exchanges and suggested that minimum support prices be fixed on the harvest-month futures price.