Impact of futures contract on agricultural commodity prices: an Indian perspective

The futures market can reduce volatility in the spot prices of the commodities and provide effective hedging of the price risk. The turnover of the commodity futures market has grown in a short span of time. The futures market can become an effective instrument of risk management and price discovery for the benefit of the producers, investors, consumers and companies. The competent authorities have over-looked the mechanism of checks and balances which can redistribute income from the small players to the big speculative financial market entities. The present study seeks to assess the role and significance of the Indian commodity futures market in the context of its efficient functioning. It is noted that instead of restricting the commodity futures market, it can be used successfully to strengthen the commodity market structure in India to achieve the broader target.