In India's expansionary phase, its growth will be commodity-driven

Rising incomes, population expansion and current low per capita availability combine to drive commodity consumption in our country

- G CHANDRASHEKHAR

Although commodities have been with us for several centuries or even millennia, over the last 20-25 years, commodity markets have attracted a lot of attention from policymakers, investors and other stakeholders.

Commodities have now become a distinct asset class in the company of equities, bonds, foreign exchange and so on. There is rising investor interest in commodities. Often, commodities have outperformed traditional assets like equities and delivered attractive returns to investors. No wonder, financial investors are active in the commodities market.

What are commodities? They are goods with economic value and are products of the earth. Produced in bulk and traded in bulk, commodities are often raw material for further processing into consumable products.

Commodities can broadly be placed in four buckets: namely energy, metals, agriculture and polymers. Energy products include crude oil, natural gas, coal etc. Metals may be classified into industrial (steel, iron ore), base (mainly aluminium, copper, nickel, zinc etc) and precious (gold, silver, platinum, palladium). Agricultural commodities would cover majorly grains, cotton, sugar, oilseeds, coffee and many more.

While equities are generally perceived as 'investment asset class', commodities are seen as 'consumption asset class'.