SEBI's ban on futures trading in certain commodities is extended, impacting farmers, inflation, and lacking evidence of effectiveness. The podcast questions the rationale and potential political motivations behind SEBI's ban in the commodity market.
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Quick takeaways
The ban on futures trading in certain agricultural commodities aims to combat inflation by restricting speculators from driving up prices, but there is no concrete evidence that it actually helps in controlling inflation.
The ban on futures trading may have had a negative impact on farmers, as it prevented them from capitalizing on surging wheat prices and resulted in missed opportunities for higher earnings, while retail prices of certain commodities continued to rise.
Deep dives
Sebi extends ban on futures trading in certain commodities
The Securities and Exchange Board of India (Sebi) has extended the ban on futures trading in agricultural commodities such as wheat, channa, and soybean for another year. The ban aims to combat inflation by preventing speculators from driving up prices. Futures trading is important for farmers as it allows them to hedge against potential losses. However, the ban has raised concerns as there is no concrete evidence that it actually helps in controlling inflation. In fact, previous bans have not shown any significant impact on prices.
The ban may have negative consequences for farmers and the government
Despite the ban on futures trading, wheat prices remained stable before and after the ban, and prices of mung actually rose. This suggests that the ban may have hurt farmers instead of protecting them. Additionally, the ban prevented farmers from capitalizing on surging wheat prices due to external factors, resulting in missed opportunities for higher earnings. Moreover, the ban did not prevent retail prices of Chana Dal and Mung Dal from rising by 11% in the past year. The reason behind Sebi's persistent ban on futures trading in these commodities may have political undertones, as it allows authorities to be seen as taking action to control food prices during elections.
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SEBI's Extension of Ban on Futures Trading in Commodities
In today’s episode for 3rd November 2023, we talk about the Securities and Exchange Board of India (SEBI) extending a ban on futures trading in certain commodities.
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