Narendra Modi Vichar Manch: Stop future trading of agricultural products: Suggestions to PMO 7

Tuesday, 1 July 2014

Stop future trading of agricultural products: Suggestions to PMO 7

Future trading

We suggest to stop future trading of agricultural products in MCX, NCDEX and ICEX. We urge to act upon it in the coming budget session. This is seventh in the series in suggestions to PMO. We are thankful to Sri Narendra Modi, Indian PM for listening voice of common people.

Future trading is an advance financial product that helps businessmen hedge their risk. However, misuse of this financial product by the speculators can make it harmful for the economy. Moreover, lay investors and common people use this many times as gambling tool. Commodity futures traders face a substantial risk due to the financial leverage provided by the exchange to traders.

In a country like India, future trading options can create financial havoc. Corporate and financial institutions from advanced and financially strong countries have tools to exploit comparatively ignorant people. I have heard about a very advance level software used by an US based financial institution that can calculate all transactions in an exchange in seconds. This type of software give competitive advantage to those companies and financial institutions over their local competitors.

An economist told me few days back that India is losing billions of dollars every year in this front. This may lead the country for severe economic and financial problem. Another serious impact is on price hike which is even more severe. Especially, price hike in food grains and related products can make disaster in country like India. We are witnessing hue and cry about price rise in electronic and print media.

We urge Sri Arun Jaitley, Finance minister of India to look after the problem and consider announcing its closure in the coming budget proposal. Registered traders of agricultural products may be allowed to future trade to a certain limit to hedge their business risk. Farmers may also be allowed to trade in the system to the extent of their estimated product.

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