India is considering lifting a three-year ban on futures trading in seven major agricultural commodities, including wheat and unprocessed rice, after a government study revealed that the ban had been counterproductive. The proposed policy change follows findings that the 2021 restrictions, which aimed to curb food inflation, instead hindered market price discovery and led to market disruptions.
A government panel has recommended ending the suspension, noting that local crop prices have stabilized following the new harvests. The recommendation, based on the study’s findings, indicates that the restrictions have not effectively addressed rising food prices as intended. According to an anonymous source with knowledge of the discussions, the decision to lift the ban will be finalized by a group of ministers within Prime Minister Narendra Modi’s administration.
The government will then request the Securities and Exchange Board of India (SEBI) to either revoke the ban or extend it beyond its current expiration date of January 31. Emails sent to both the finance ministry and SEBI for comment were not immediately answered.
If the ban is lifted, it would mark a significant shift in India’s approach to managing agricultural markets. The country, one of the world’s largest producers of grains and sugar, has gradually eased several pandemic-era restrictions on agricultural goods. Earlier this year, following Modi’s re-election, India lifted its ban on the export of certain rice varieties and released grain stocks from state reserves to stabilize domestic markets.
The futures trading ban was initially imposed in 2021 to ensure a steady supply of key grains for a government welfare program, which provides free wheat and rice to approximately 800 million people. The ban came in response to surging food inflation, which had reached a three-decade high. In addition to restricting futures trading, India also curtailed exports of wheat, sugar, and rice, imposed limits on hoarding, and set storage restrictions. While these measures were intended to protect consumers, they triggered significant backlash from farmers and caused volatility in global markets.
A study commissioned by SEBI found that the suspension of futures trading in various commodities—such as chickpeas, rapeseed, soybeans, green gram, and crude palm oil—damaged both futures and spot markets. Despite the bans, prices continued to rise, exacerbating the challenges for both local farmers and consumers. The report further highlighted that each suspension had eroded trust in the derivatives market, making it more difficult to attract investment in the sector.
As India prepares to make a final decision, the government is under increasing pressure to balance its efforts to control food inflation with the need to restore market confidence and support agricultural trade.
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