A draft report for India's Planning Commission, released early last month, went to great pains to explain how modern commodity markets benefit farmers, among the poorest of the country's poor.
India's traditional commodity brokers, the ahratiyas, had often colluded to cheat farmers out of the proper prices for their produce, according to the report by the committee on financial sector reform headed by Raghuram G Rajan, a former chief economist at the International Monetary Fund.
The country's commodity exchanges were now countering this by setting up spot markets that offered farmers the chance to sell their goods at market prices to alternative buyers. The report explained how the commodity futures markets were allowing farmers and buyers to hedge risk.
The Rajan report came as a separate panel, commissioned by the government and headed by economist Abhijit Sen to study the impact of futures trading on prices of staple foods, said there was no conclusive evidence linking commodity derivatives to price increases.
Yet, in spite of the chorus of learned voices in favour of commodity futures markets, Palaniappian Chidambaram, finance minister, this month banned commodity futures trading in four more important goods on top of four banned earlier.
In comments to journalists before the latest ban, he hinted that the measure was political in nature. "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,'' Mr Chidambaram told Bloomberg Television.
The measures attracted widespread criticism from economists.
"This is just pandering to the public," Ifzal Ali, chief economist at the Asian Development Bank [Get Quote], said.
The apparent disregard by politicians of evidence in support of commodity futures has prompted speculation among traders that the government wants to make it difficult for farmers to sell their produce at market rates to help keep prices down.
With additional reporting by Raphael Minder in Hong Kong
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