Thursday, May 8, 2008

India facing inflationary pressure

India has suspended futures trading of soy oil, potato, chick pea and rubber until September of this year due to soaring prices in commodity markets. Along with reduced exports and lowering of costs on import tariffs, the domestic market has been unable to keep various commodity prices from making multi-year highs.

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India suspends 4 commodity futures on price worries



By Sourav Mishra

Thursday May 8, 08:28 PM


MUMBAI (Reuters) - India has suspended futures trading in four commodities with immediate effect in its latest move to rein in soaring inflation, but industry officials said the step would not ease price pressures.

India has taken a series of fiscal measures to bring down prices recently, and the commodities market regulator said trading in futures contracts in soyoil, potato, chana or chick pea, and rubber had been suspended for four months.

The government, facing state and national elections in the next 12 months, is keen to show it is tackling rising food prices, which contributed to a surge in annual inflation to 7.57 percent in mid-April, its highest in more than three years.

Soybean, rapeseed or mustard seed, guar seed and turmeric prices and volumes picked up as investors switched out of the suspended contracts. India banned futures trading in rice, wheat and two pulses in early 2007. Its decision to suspend four more commodities was not a total surprise to the market as inflation accelerated, stoked by oil, food and metals prices worldwide.

In recent months, New Delhi has also banned some exports and lowered duties on some imports to tame prices and the central bank has tightened policy to curb excess cash in circulation.

FMC Chairman Khatua said the suspended and banned futures would be reviewed in September and were likely to resume then.

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