Rethinking suspension: Futures trading is not a source of inflation

The retail-to-wholesale price difference in the post-suspension period also turned out to be much higher than in the pre-suspension period

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