May 05, 2008 14:40 IST
Indian Finance Minister P Chidambaram on Sunday hinted at suspending food futures trading in the country.
Speaking to reporters in Madrid, he said ''The pressure is to suspend a few more food articles, If rightly or wrongly people perceive that commodities- futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice''.
Left parties in India who supports the government wants to stop trading in cooking oil, sugar and other commodities, saying speculators are driving up prices and fanning inflation.
The government halted futures trading in wheat and rice last year and lentils in 2006 to check a surge in domestic prices of the commodities.
A panel formed by the government under economist Abhijit Sen to study the impact of futures trading on prices of staple foods, this month suggested maintaining the ban on rice and wheat.
It did not recommend extending the ban to other commodities, saying there was no conclusive evidence to suggest futures trading contributed to price increases.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. Online trading in commodity futures in India started in 2003.
Domestic traders and producing and consuming companies are the main participants in India's commodity exchanges, compared with the 13 million individuals who invest in stocks. Overseas funds are not allowed to trade in India's commodity futures.
India also capped retail fuel prices and last week scrapped import duties on steel products including pig iron, hot-rolled coils, ferrous alloys and zinc and imposed an export tax on other steel products to augment local stocks.
The combination of higher interest rates and slowing exports may curb India's growth to between 8 per cent and 8.5 per cent in the year to March 31, according to country's central bank.
India's $912 billion economy, Asia's third biggest, has expanded at a record average pace of 8.7 per cent since 2003.
India's inflation accelerated to 7.57 per cent in the week ended April 19, the fastest pace in more than three years as prices of food and manufactured products rose.