Farm sector likely to grow at 4%, says Pawar

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‘Growth of futures markets is lopsided’.

A file picture of the Union Agriculture Minister, Mr Sharad Pawar.
A file picture of the Union Agriculture Minister, Mr Sharad Pawar.

Our Bureau

Mumbai, Nov. 23 Despite many challenges such as shortage of fertiliser and delayed monsoon, the Government expects an agriculture growth of 4 per cent in 2008-09, similar to what it was last year.

Speaking at the seventh National Conference of Commodity Exchanges organised by the commodity markets regulator Forward Markets Commission, Mr Sharad Pawar, Ministry of Agriculture, Consumer Affairs and Food & Public Distribution, said that though the climatic conditions were unfavourable for a few crops, the Government expects the country to register an agriculture growth of about 4 to 4.5 per cent.

Terming the growth of futures markets as “lopsided”, Mr Pawar said “the share of agriculture commodities in the total value of trade is dwindling very fast.” The share of agriculture in the total commodity futures trading, which was one-third in 2006-07, has come down to less than one-eighth in the current year as on September 2008.

Part of the fall can be attributed to the suspension of trade in some agriculture commodities, but that does not seem to tell the total story, he said.

Some of the regulatory measures such as price bands, and trade leverage restrictions were looked down on by the purists of the market, but now they are looked upon favourably for disciplining the market, particularly after the recent global concerns over the unchecked rise in crude oil prices.

Support systems

Allied support systems such as easy and cheap warehousing and institutional credit facilities near the villages will help farmers reap the benefits of the information disseminated by the exchanges. “The exchanges are taking steps on all these fronts, but the results are either not forthcoming or visible,” he said.

There may be difficulties on credit availability and warehousing as multiple agencies are involved, but all the loose ends need to be tied up urgently. Otherwise, initiatives taken by few institutions such as Punjab National Bank and Federal Bank can also become an instrument of exploitation of farmers like many other such institutions, as asymmetric information coupled with uneven empowerment can lead to their exploitation.

Though it has been proved beyond doubt that commodity futures have no impact on spot market prices, it cannot be denied that there can be short-term aberrations, which have to be set right. All stakeholders, including the Government, regulator, and exchange management, should be on constant vigil to see that nothing untoward happens in the market to tarnish its image and bring disrepute, he said.

Futures participation

Calling on the Government to allow banks and financial institutions to participate in futures trading, Mr B.C. Khatua, Chairman, Forward Markets Commission, said the clearance of Forward Contracts (Regulation) Amendment Bill and Warehousing (Development & Regulation) Act, 2007 will lead to larger participation and quick enforcement of regulations.

Mr Yashwant Bhave, Secretary, Ministry of Consumer Affairs, said the Government and the regulator must be ever vigilant about possible market manipulations. The FMC’s efforts in this area should be supplemented by the exchanges.

“The exchanges, as the primary tier of regulation, have sufficient regulatory powers that find expression in their rules and byelaws and the onus to enforce market integrity and transparancy largely, if not entirely, rests with the exchanges.

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(This article was published in the Business Line print edition dated November 24, 2008)
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