FDI in Commodity Exchanges of India

The flow of foreign direct investment in commodity exchanges of India depends on the report of Abhijit Sen Committee. This Committee was formed by Indian Government, in order to study the effect of commodity futures trading on the price rise of essential commodities.
FDI in Commodity Exchanges of India can significantly change the commodity trading system in India. But, whether FDI or Foreign Direct Investment is going to flow in Indian Commodity Exchanges, depends on the report of Abhijit Sen committee.This committee, headed by Abhijit Sen, member of Planning Commission, was formed in order to generate a report on Futures Trading in India.

Through this report, Indian Government wanted to study, what impact the commodity futures trading of agricultural commodities create on price hike. In March 2007, at the time of committee formation, a specific term period was determined, within which the committee was bound to submit its’ reports. But, afterwards, the term period has been extended. Information about this term period extension came from one of the official of Forward Markets Commission.
The official informed that the Abhijit Sen committee was supposed to submit the report in May 2007, but the committee asked for time extension.
The leading commodity exchanges of India like Multi Commodity Exchange of India(MCX) and National Commodity and Derivatives Exchange(NCDEX) have received offers of buying equity stakes of foreign exchanges like ICE. The exchanges has also got offers to pick up equity shares from Foreign Institutional Investors like Fidelity and Goldman Sachs. But, these offers cannot be accepted until the Abhijit Sen Committee submits its report.

It can be mentioned here, that the Indian Government was compelled to form this committee, as the different political parties demanded, that the futures trading of commodities was the main reason behind the price hike of essential commodities. Indian Government found futures commodity trading quite essential for growth of Indian Economy, but after facing political opposition, it was forced to set up a committee for generating report on futures trading.

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Last Updated on : 27th June 2013

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