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Challenges and recommendation for Growth of the Indian Commodity Market

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Indian Commodity Market

After internet becoming the buzzword for the common people there has been a considerable rise in investments in the commodity market. Commodity Market deals with the trading of raw materials which includes both the Agri and Non Agri Products.

India being a growing and agriculture based economy has a vast dimension in the growth of the commodity market trading. The agriculture sector contributed to a tune of 17% to the GDP and is an important sector to focus. Indian commodity market consists of both the retail and the wholesale market in the country. The retail sector being in its booming stage, which contributes nearly 12% to the economy, creates a vast dimension for the growth of commodity market and the economy as a whole.

Read more about the Indian Commodity Market.

Implementation of the LPG Policy in 1991 increased the integration of the Indian economy with the global economy, which resulted in rising economic interest in commodities in India.  The tri-policies have resulted in dismantling of restrictions on internal and external trade resulting in the expansion of the market opportunities.

Agricultural sector saw a strong 3.9% YoY growth in the quarter ended June 2011 due to the higher production of rice, wheat, pulses as compared to 2.4% YoY growth during the same period last year. This indicates the commodities are becoming increasingly critical for fueling India’s economic growth. With the incoming of the Foreign Direct Investment in the economy, the growth of the market is accelerating.

Despite the widespread scope of development and growth the commodity market in India is still in a nascent stage. It should be given a push by providing the infrastructure facilities like warehouses, transportation.

Challenges for the Indian Commodity Market

i) It was reported that due to the poor infrastructure facilities which include improper storage faculties for the grains, huge amount of food grains were wasted. Thus the country currently needs proper infrastructure so that the wastage of life supporting food grains could be curbed.

ii) India needs to develop on irrigation facilities in certain parts of the country which would help in the enhancement of the growth of food crops and other commodities. It is important that proper irrigation mechanism, technology for better production of crops, warehouses and cold-storage for storage facilities and of course transportation for transporting the products to the market needs to develop in a sophisticated manner.

iii) The World Bank in 2008 said, Indian economy has tremendous capacity of producing agriculture products which can be used to feed not only India but the entire world. Currently we see such kind of huge capacity/potential which the economy has is underutilized.

iv) It is important that transparency in the system is incorporated which will help the farmers get the right value for the product produced by them which could be only achieved by abolishing middlemen involved in the trading activities.

v) Loans to the farmers should be made available so that the entire supply chain remains intact and the end consumers along with the investors enjoy the benefit of the improved chain.

Recommendations for the Growth of the Indian Commodity Market

As far as the exchange based commodity trading is concerned, the country needs to work towards developing its infrastructure which includes transparency in the system of trading, ease of documentation, verification, electronically tracking the orders and it’s delivery wherever applicable.

Apart from these methods, it is also important to impart proper commodity trading training/education to people so as to make them aware of the tremendous opportunity available in the market. It is important that proper visual based training is imparted to the prospective investors regionally which will attract them towards investing in the market.

Thus to conclude we can say that the Indian Commodity market has a wide scope of growth and development provided necessary steps are taken in the right direction. It should be ensured that the development towards the improvement of commodity markets is very well informed to the customers.


Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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