Continuing the ban on trade in agricultural commodities will damage investor confidence, says CPAI president.

It was a very eventful year for commodity derivatives exchanges. While metal and energy package trading was strong, agricultural commodities struggled. Narinder Wadhwa, National President, Indian Traders Association, spoke about the past year in business. Excerpts:

What is the biggest achievement of the business change in the past year? 

MCX implemented CDP in the last quarter of 2023. Such a transition in the ongoing market is the first of its kind in any jurisdiction. The new system is set up and there is no big problem. At the same time, the improvement process is still ongoing. The exchange had record volumes during 2023 as well, as the options market was lively on the platform. However, the market of agricultural goods was able to withstand the prohibition of important goods and gave a heavy blow to NCDEX. The extension of the ban on important agricultural products left only a narrow range of goods for trade. The main purpose of stock exchanges was to guide the price discovery process and protect against the risk of trading. The purpose of the stock market is lost if the most important agricultural commodities are banned. We expressed our concern to the ministry.

Do you believe in commodity market inflation?

Conversely, a strong and well-functioning commodity derivatives market can be an important part of India’s efforts to become a $5 trillion economy. By providing greater price transparency, risk management tools and investment opportunities, these markets can help stimulate growth, reduce volatility and revitalize the Indian economy as a whole. Confidence in agricultural commodities is clearly shaken by recent unexpected contract terminations and ongoing trade bans.

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