COMMODITIES IN INDIA

EMERGING GLOBAL COMMODITY MARKET REFORMS, LESSONS FROM INDIA

B C Khatua

Commodity Online, November 7, 2011

The global financial markets have been literally in a churn since early 2008,which became more pronounced after the collapse of Lehman Brothers. Apart from the housing bubble and bankruptcies caused by excessive speculative investments by investment banks in high-risk, complex structured products, the role of excessive speculation in select commodities by high return seeking fund houses, viz., Hedge Funds, Private Equity Funds, long-only funds etc in causing this crisis, first in US and then in the whole global economy, has been well chronicled over the last 3 years.

The massive public funds spent by the US and other governments to bail out these entities in crisis may have saved them, but the aftermath of the crisis persists in terms of high rates of unemployment , persistent high inflation in many economics including India, high interest rates to combat inflation resulting in slow economic recovery and slowing of the GDP growths. The debt crisis in European Countries , viz., Greece, Spain, Ire Land, Portugal, Italy etc. has cast a heavy shadow on the global sentiments apart from plunging the Eurozone into a tailspin. Stock markets are crashing and commodities are plunging. That the food prices in India buck the trend and are causing sleepless nights to the government and the poor alike is another paradox which needs another article to explain.

The touching faith of the likes of Mr. Alan Greenspan, in the ability of the markets to self-regulate in the midst of the scorching growth of the financial markets in the 1990s and early years of the 21st century, lies shattered. The proof of limitlessness of human greed ( in the form of investment bankers and high return seeking HNIs) has been laid bare once again. The efforts of the US Government to rein them in have not shown any significant change in their attitude or behavior, thanks to the easing of the crisis and their leverage in influencing the political legislative process and lobbying ability. The "occupy wall street " movement of those adversely effected by the crisis is a manifest reaction to this phenomenon.

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