London: Finance Minister P Chidambaram’s proposal to impose a blanket ban on trading in food futures in India to contain prices has drawn sharp criticism from economists, one of whom described the move as a “political gimmick.”
Chidambaram, speaking at Asian Development Bank’s annual meeting in Madrid on Monday, said that “the pressure is to suspend a few more food articles. If rightly or wrongly, people perceive that commodity futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice.”
His remarks reportedly drew a strong rebuke from two senior India-born officials of the ADB, highlighting concerns among international institutions that costlier food is leading to trade protectionism and new market distortions.
Rajat Nag, ADB managing director-general, told the Financial Times that trading restrictions “send the wrong signal and are just not productive.”
Ifzal Ali, ADB chief economist, described banning futures trading as “a political gimmick”.
The Financial Times reported from Madrid that the proposal highlights growing concerns in Asia over the role of hedge funds and financial markets in the recent surge in commodities prices.
In India, inflation is ruling at 7.57 per cent for the week ended April 19 mainly due to costlier food items, as per the latest government figures.
India does not allow futures trading -- trading at a set price for delivery by a fixed date in future -- in four food items including rice and wheat and has stopped exports of certain commodities.