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Banning food futures could ease prices
LAST UPDATE: Monday, 5 May 2008 - 11:57:44 PM
WHILE every body from Condoleezza Rice to George Bush seems to be on a denigrating spree on the food habits of Indians, Finance Minister P Chidambaram now says that the government may be forced to ban futures trading in food items or essential commodities to contain food prices.
Interestingly, commodity experts say that such a move might not help ease food prices in the long run, but in the short term, it could ease prices marginally.
Speaking to this website's newspaper, Atul Shah, head of commodity research with Emkay Share and Stock Brokers, said that since the current food grain supply shortage was largely due to supply side issues, banning commodities futures would not make much of a difference.
"In the immediate term the move could have a minor impact, say about 5 to 10 per cent maximum. However, in the long run, if the supply side does not improve the move will not make any difference, and will in fact spoil the sentiments of global investors, who are looking at investing in the Indian commodity markets," Shah added.
According to a senior official in one of the leading commodity exchange MCX, there is no authentic data to support the fact that banning food futures will have any impact on the prices.
"Futures trading in commodities is healthy as it is used for price discovery and hedging. Whether futures trading is allowed or banned, global supply-demand factors will always affect markets," he said.
Shah explained that trading in a commodity exchange is regulated and cannot be used to horde.
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