New Delhi: The government’s priority is to ensure that gains from economic growth reaches the farm sector which sustains a large proportion of India’s population, finance minister Arun Jaitley said on Sunday, ahead of next month’s Union budget.
“India is one of the fastest growing economies in the world and the growth is benefiting people in different sectors… maximum population is dependent on agri sector and unless the gains are clear and evident, the (economic) growth is not justifiable and equitable," Jaitley said at an event to launch India’s first commodity options in agriculture.
“Ensuring the benefits reach the agri sector and growth is visible—this is among the priority areas for us," he added.
The finance minister’s remarks come at a time when India’s farm sector growth has plunged from 4.9% in 2016-17 to an estimated 2.1% in 2017-18. Also, since June last year, farmers have been protesting against low crop prices and demanding debt waivers.
Launching the options tool, developed by the NCDEX commodity exchange for trade in guar seeds, Jaitley further said that “this may appear to be a small step, but it is a significant one, in the direction of agricultural trade as this will ensure that farmers will receive a better price for their commodities."
He added that the hedging tool will help the goal of doubling farmer incomes by 2022. “Guar seed is a major contributor to revenue generation, hence making it a suitable commodity to start with," he said.
Approved by the Securities and Exchange Board of India, the hedging tool was initiated for guar seeds to deepen trade and improve price realization for farmers.
“This instrument will give a strong impetus towards systematic development and transformation of commodity derivatives market in India, which will make the agri economy more efficient and bring huge amount of value for the farmers," NCDEX said in a statement.
Guar or cluster beans is a legume and its processed gum is widely used in the food and fracking industry. Rajasthan is a leading producer of cluster beans.
Options are a trade contract which gives the buyer the right, but not the obligation, to buy or sell an asset on a specified date at a predetermined price.
“The new hedging tool will help in better price realization and mitigate price risks… This instrument will create a win-win situation for farmers irrespective of the price movement," said Samir Shah, managing director and CEO of NCDEX.
According to NCDEX, options contracts expiring in the months of February, March and April of 2018 are available for trading from 14 January onwards. On the launch day, 8,010 tonnes of guar seeds valued at about Rs36 crore were traded.
Last year’s budget had proposed to create an operational and legal framework to integrate spot and derivatives market for commodity trading for the benefit of farmers. So far, 59 farmer producer organizations with more than 2,30,000 member farmers have opened their trading account with NCDEX to participate in commodity trading.
PTI contributed to this story.