The Sri Lankan Crisis

an agriculture which is quite different from other countries. There is a lot of fragmentation and poor peripheral infrastructure, so this becomes a significant hurdle for the farmers to produce in massive quantities keeping the same quality, which would be a prerequisite to using the exchange platform. But given the agrarian economy we are, it is only a matter of time before we see the boom that it deserved to have.

Question: Could you shed some light on why there has been a declining trend in the trade volumes of Agri commodity derivatives since the 2011-13 period when it was at its peak?

Turnover is a function of participants and the products. The exchange saw a considerable decline in members post the SEBI FMC merger. This was because of the misconceptions people had with SEBI as a regulator; so, post the merger we saw that 40% of the members surrendered their membership. After this also the exchange was hit with demonetization which had a large impact on physical markets. We saw the lowest turnover around that time. Also lockdown took everyone by surprise, which impacted the market severely. Another factor is the repetitive product bans which have been imposed which have shattered the confidence and lowered the turnover significantly of the physical markets in India. This impacts the ability to introduce new products to the exchange, yet as compared to 2011-13 we now have a wider product basket. We have added options, indexbased products and also added products in the nonAgri space. These products do hold a lot of promise and with time these markets will grow. An economy like India, whose Agri sector has perceptible global impact with it being the largest exporter for a certain commodities, the Agri-derivatives market has a major role to play to unleash the latent potential of Indian Agri markets. The Agri market is critical for financial inclusion, this is important since it helps to reach out to the last mile stakeholder which is the farmer

Question: What are some of the triggers in your opinion which will result in an increase inAgri- commodity trading in India?

In India, the policy related matters are considered from a very subjective perception. Clearly, one of the foremost objectives and perhaps an ongoing objective is to equip the policy makers to give them deeper understanding and data driven quality research on Agri commodity market such that it can support a regulatory regime which will help the Agri-Commodities derivatives space to develop and prove its utility. If you have a look at models of other countries, say China, the Agri markets witnessed a flip in growth post the government mandated the public sector units to participate in the commodity exchange platform. The government also started making its purchases through the commodity markets. In India, we have the public distribution systems which acquire a lot of Agri commodities, and we have the government agencies procuring at MSP. All that procurement could be done through the exchange space. Not only would that add transparency, but it would also help monitor and regulate the purchases, which is a win-win. When government buys at MSP they store the commodities at huge government warehouses and then there is a surplus of the product and if not stored properly, it can lead to a lot of wastage. All this could be avoided if done through an exchange platform, which could give a huge boost to the commodities market. Finally, enhancing the institutional and even foreign participation will help broaden the reach. In fact, agriculture is the backbone of Indian economy, and the commodities exchange can play a huge role in unshackling the farmers, ensuring social and economic prosperity to the country