To combat high food inflation and increased spot price volatility, the Securities and Exchange Board of India (Sebi) in 2021 suspended derivatives trading in seven agricultural commodities—wheat, soybean, crude palm oil, paddy, moong, chana, and mustard oil/seeds. Subsequently, the suspension was extended till the end of this year. As the rate of retail inflation surged to a 14-month high of 6.2 per cent in October, driven by food prices, a reality check is in order for evaluating the merits of the ban and its extension. In this context, two recent studies—by researchers at Birla Institute of Management Technology and Indian Institute of Technology Bombay—have done well to examine the effectiveness of the futures trading suspension on retail prices.
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