NEW YORK (MarketWatch) — India is reportedly considering a ban on futures trading in food commodities, as the government struggles to curb soaring inflation and the rising cost of food has become a major international concern.
India’s finance minister Palaniappan Chidambaram said Monday that he was considering a blanket ban on trading in food futures, according to a report in The Financial Times.
Chidambaram said that governments across Asia share his worries over speculation in the commodities markets, the FT reported.
India is “facing a very grave crisis on the food front,” the minister said on the sidelines of the Asian Development Bank’s annual meeting in Madrid, according to the FT.
India has already banned futures trading in rice and wheat. The latest remarks from India’s finance minister come as his government confronts growing pressure at home to curb rising inflation.
On Friday, official data showed that India’s inflation hit a 42-month high of 7.57% in the week ending April 19.
“It’s indicative of the fact that there’s a real issue here and governments are scrambling to find some kind of solution,” said Cameron Brandt, global markets analyst at EPFR Global, about India’s idea to ban trading in food futures.
“I don’t think it’s a great idea especially given that their food futures market is fairly modest,” Brandt said. “If you take that away, you lose pretty important market signals. One thing the food futures market is telling us is plant more food.”
There’s not much to say about this except that India still has a ways to go to become a first-rate country.
Also, the ignorance about basic economics of many of the commenters on economics and finance websites never ceases to surprise me.