Indian Agri-Commodities Markets: A Review of Transition Toward Futures

Abstract

By using indications given by the commodity markets, farmers, growers, or producers can minimize the price risk and avoid a supply gut. The consumers of the output can minimize the price risk and ensure that the demand pressure is appropriately capped. It was in this backdrop that farmers and food grain merchants initiated futures markets in agri-commodities. This article has been successful in documenting the evolution of agri-commodities futures markets in India and their regulatory framework. It also captures the transition toward agri-commodities futures by engaging in a comprehensive survey of extant literature. The market growth analysis indicates that the transition toward agri-commodities futures markets has enabled price discovery and better price risk management. While ensuring price risk mitigation and remunerative returns, these markets also contribute to scaling down the downside risks associated with agricultural lending and, thereby, facilitate the flow of credit to agriculture. Further, they also hold a key role not only in reinvigorating the spot markets but also in triggering the diversified growth of Indian agriculture in line with the consumption pattern. Thus, enabling policies need to be put in place to strengthen the agri-commodities futures markets by streamlining the supply chain.