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Futures commodities trading OK'd

July 07, 2004 16:59 IST

Favouring an extensive effort to harness the futures market in commodities, the pre-Budget Economic Survey on Wednesday stressed on utilising it for price stabilisation and providing cheaper credit to farmers under a sound SEBI-like regulatory framework.

Economic Survey 2003-2004: Complete Coverage

There is a need to use commodities futures markets in a variety of ways such as utilising options for "price stabilisation" efforts of the government, delivering credit products where farmers pay lower interest rates when prices are low and extending knowledge and market access to every district of the country, the annual survey said.

Tabled on Wednesday in Parliament, the Survey also favoured greater use of 'demat settlement' in futures trading of commodities, a concept where individuals, nationwide, interact with a depository, obtain account balance statements and execute transfer of securities.

It said commodity derivatives market will also facilitate bank lending against commodities and spot trading and promote modern development of collateral management.

The growth that has been made possible by electronic trading needs to be consolidated, by building a sound regulatory framework, comparable to what has been done by the Securities and Exchange Board of India for the equity market and sound risk management.

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