CPAI seminar suggests measures to boost commodity markets for achieving $5 trillion economy goal

Commodity Participants’ body organises seminar on “Commodity Markets – On the Cusp of Growth” to discuss urgent measures for enhancing investor participation, developing new products

Seminar also delves on reasons for lack of interest from institutions such as Alternate Investment Funds (AIFs), Mutual Funds (MFs) and PMSes, who were allowed by SEBI last year to participate in commodities

Developing commodities ecosystem and linking spot and derivatives market will enable commodity markets to contribute 40% of the $5 trillion economy goal, says CPAI President

by Shrutee K/DNS 

Commodity Participants Association of India (CPAI) organised a seminar on “Commodity Markets - on the Cusp of Growth” to discuss urgent measures for rejuvenating India’s Commodity Markets for achieving the $5trillion size for the economy by 2024-25.

According to Shri. Narinder Wadhwa , National President, CPAI: “India’s Commodity Markets have the potential to become the biggest contributor in making India a $5 trillion economy by 2024-25, as is the vision of our government. Studies indicate that as much as 40 per cent of this target could be met by the commodities sector alone. However, to achieve this, we need to develop the commodities ecosystem and link spot market with the derivatives market.”

The seminar provided an industry-wide interface for industry stakeholders and ecosystem players to discuss with representatives from the government and regulator to deliberate on measures for enhancing growth of India’s commodity markets.  The highlight of the seminar was two panel discussions on the challenges and opportunities in India’s Commodities Markets.

The first panel on “Changing Dynamics in Commodity Derivatives landscape” deliberated on regulatory reforms that have paved way for new categories of investors to participate in commodities and the reasons for such measures not showing results.  The panel concluded that high costs of trades due to taxes such as Commodities Transaction Tax (CTT) was one of the biggest deterrents for investor participation and hence, urged the government to take withdraw CTT without any further delay.

Mr. Wadhwa said: “India needs to revisit its high costs of trade in commodities market due to tax incidences such as CTT, which makes participation unviable for investors, including the recently-allowed categories of institutional investors such as Mutual Funds (MFs), Alternate Investment Funds (AIFs) and Portfolio Management Services (PMS).” 

Last year, SEBI had allowed institutions such as Alternate Investment Funds (AIFs), Mutual Funds (MFs) and PMSes to invest in commodity derivatives, a move that was meant to boost commodity market. However, so far institutions haven’t taken much interest due to CTT imposed on commodity transactions, which leads to high costs per trade.

The second panel discussion was on “New Products and Opportunities in Commodity markets”, which dealt with regulatory measure which could allow innovative products in India, such as there is scope of introducing Indian minted gold with Indian gold delivery standard . An international bullion exchange at IFSC in GIFT City, as proposed by the government, will also create new prospects for investors.

Shri. VS Sundaresan, Executive Director, SEBI along with Shri. PS Reddy, Managing Director & CEO, Multi-Commodity Exchange (MCX), were the guests of honour at the seminar.

ABOUT CPAI: Commodity Participants Association of India (CPAI) is the registered all India association of all the national commodity exchanges and comprising commodities participants of recognized Commodity Exchanges like MCX, NCDEX, NSE, BSE, ICEX, MSEI and other commodity market participants in the value chain operating across the country. The Association has its Head office in New Delhi and has four regions viz. Western region, Eastern region, Northern Region and Southern Region. CPAI’s mission is to work for a transparent, efficient, safe & vibrant commodity derivatives market and creating world-class infrastructure for commodity spot markets. CPAI has a vision of Indian Commodities Market making an impact & influencing world commodity markets along with providing an efficient platform to consumers, producers, traders and the industry.