Impact of Commodity Derivatives Trading on Inflation in the Indian Economy with Special Reference to Selected Agriculture and Industrial Commodities

Abstract

India is a commodity-based country where two- third of the population directly depend on agriculture and being one of the largest producers of over 80% of the agricultural commodities; it is imperative to safeguard the interests of various stakeholders including farmers by providing them adequate hedging facilities through development of commodity derivatives market. The national level electronic exchanges and regional exchanges for trading commodity derivatives sprung up, including the Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX) etc. Further Agricultural Produce Market Committee (APMC) was set up within each state combining several market areas to compartmentalize markets and inhibit the free flow of commodities from one area to another. The range of agricultural derivatives of the exchanges and the trading made available on a variety of commodities including the staples of everyday life ensures liquidity, transparent pricing, and wide opportunities in a regulated centralized market space with equal access for all participants. newline1.1:MEANING OF COMMODITY newlineCommodity is any good or material that can be bought or sold and reasonably interchangeable as an article of commerce. Commodities include agricultural products, metals, and fuels. Commodities are traded in bulk on a commodity exchange or spot market. newlineA Commodity market is a physical or virtual marketplace for buying, selling, and trading raw or primary products and there are currently about 50 major commodity markets worldwide that facilitate investment trade in approximately 100 primary commodities. newline1.2:Types of Commodities newline Hard Commodities (non-agricultural) - Hard commodities are typically natural resources that must be mined or extracted such as Gold, Silver, Aluminium, Zinc, Copper, and Oil etc newline