One clear message comes from the expanded ban on futures trading in agri commodities. Crushed under mounting pressure from the Left over the inflation crisis—which is rooted in problems other than such trading—the UPA government subscribed to political panic calls, despite the absence of economic logic.
The official expert panel led by Abhijit Sen had found no or little evidence linking price volatility with futures trading in agri commodities already banned last year. Now, no less than the regulator—the Forward Markets Commission—has termed the new ban unfortunate, saying it will seek the lifting of all these bans in four months. Its chairman, B.C. Khatua, has pointed to “perceptions in some political quarters” behind the suspension of trading.
It is indeed unfortunate that the government should clamp a market that actually works to improve price signals. It coolly forgets how the trend is a global one —and the fact that inflation expectations in agri commodities are already cooling.