Traders Expect Populist Budget

Domestic commodity traders said yesterday the Union Budget is likely to be populist and friendly to farmers, but a spirit of economic liberalisation is unlikely to extend to approvals for futures trading.

They said the Union Budget for 1997-98 may, however, marginally lower tariffs for some commodity imports. Futures trading is a separate and sensitive issue and may not find a reference in the budget though it is a long-pending demand, said Bombay Oilseeds and Oils Exchange (BOOE) president Navin Shah.

But I expect the Budget to be populist and favourable to agriculture-based products and to some extent it could help commodities trading, Shah said.

 

The second Budget of the United Front government, run by an alliance of 13 political parties of varying ideologies, will be presented in Parliament on February 28.

Its difficult to have a consensus with so many parties involved in decision-making, said an official of the East India Cotton Association. He said a proposal to allow futures trading in cotton had been approved by the federal ministries of agriculture and civil supplies but still awaited a cabinet ruling.

Futures trading is not a priority. But agriculture is expected to get a thrust. There could be some production-linked incentives which could also help cotton growers, he said.

An official committee in 1994 recommended introduction of futures trading in cotton, oilseeds and silver. Gold and sugar could be considered at a later stage, it said.

At present, futures trading is allowed in castorseed, hessian, gur (jaggery), potatoes, turmeric and pepper.

The first futures exchange to facilitate global trading in pepper is expected to be launched in April in Kochi, Kerala. Commodities futures trading was banned in the 1950s and 60s in a bid to stabilise prices and to end hoarding and speculation. The commodity traders want futures trading introduced in order to integrate the country with international markets and to improve business volumes Shah said edible oil traders were now expecting relaxation of rules to enable them to hold higher stocks. We have also requested the government to allow futures trading in imported palmolein which it might concede, he said.

Traders said they expected import tariffs on non-ferrous metals to be brought down further in tune with the governments commitment to economic reforms.

We are expecting a 5 per cent reduction in import duties on non-ferrous metals, said Bombay Metals Exchange president Sharad Parikh. At present, the duty is around 30-35 per cent on imports.

Bullion traders said they expected foreign exchange rules to be relaxed further, which would facilitate higher imports of gold and silver.

But I personally do not think the government will allow futures trading in bullion at this stage, said Makhan Lal Damani, president of the Bombay Bullion Association.