In attempts to control the rising inflation, the Finance Ministry has put a ban on trading futures contracts of select agricultural commodities for a year.
The markets regulator Securities and Exchange Board in India has directed the commodity exchanges to suspend trading of futures contracts of seven agri-commodities until further orders.
Seven Commodities Banned for Trading
According to SEBI, the seven agricultural commodities banned for futures trading for a year include:
- Paddy (non-basmati),
- Wheat,
- Chana,
- Mustard seeds and its derivatives,
- Soya bean and its derivatives,
- Crude palm oil, and
- Moong
“ No new contract shall be launched till further orders. In respect of running contracts, no new position will be allowed to be taken. Only squaring up of position will be allowed.
These directions will be implemented with immediate effect. The above-mentioned directions are applicable, for a period of one year,” read SEBI’s notification.
Why Take this Step?
Inflation is on the rise in India, as it is globally. With the Omicron variant of Covid-19 on the rise, inflation is pegged to rise, and central banks across the globe, including the US Federal Reserves and UK’s Bank of England have announced cutting down of stimulus provided to aid economic growth during the pandemic, by instituting interest rate hikes to combat growing inflation.
The Government is facing pressure from opposition, as prices of essential commodities are increasing.
The inflation figures for November 2021 have also been of no help, as it continued to rise despite measures taken by the Government to control the rise. The Govt made cuts in excise duty, followed by state governments too, yet it did not appear to provide much relief in tempering inflation.
CPI inflation increased to a three-month high in Nov to 4.91%, in conjugation with rising food prices, as it hiked almost 1% from October’s figure to 1.87%.
According to analysts, the weakening domestic currency could also add to the rising prices of retail products.
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