Tuesday, June 24, 2008

India’s commodity market to grow 30% by 2010

by Jo Black

The Indian commodity market which expanded by 50 times in a span of 5 years from Rs.665.30 billion ($16.6 billion) in 2002 to Rs.33753.36 billion ($843.8 billion) in 2007, is now expected to grow at a steady speed of about 30% by 2010 and touch a volume of Rs.74156.13 billion ($1853.9 billion) since people’s participation in such trade will continue, according to findings of the ASSOCHAM.

According to ASSOCHAM findings, the size of commodities trade in 2003 stood at Rs.1293.64 billion ($30.7 billion ) which thereby went to Rs.5717. 59 billion ($142.9 billion) in 2004, recording an increase of 341%.

In 2005, the growth in commodities trade was by 276% as it went up at Rs.21551.22 billion ($538.7 billion).

However, in 2006, though the commodities trade increased to Rs.27393.40 billion ($684.8 billion), it could register year on year growth of 27% over the last year.

For 2007, the trade in commodity reached at Rs.33753.36 billion ($843.8 billion) and registered a growth of 23%.

Releasing the ASSOCHAM estimates, its President, Mr. Sajjan Jindal said that the growth in commodities derivatives trading which was at massive level in the last five years would now grow by about 30% to reach projected level of Rs.74156.13 billion ($1853.9 billion) in next 2 years.

The turnover as proportion to GDP of commodity trade increased from 4.7% in 2004 to 20% in 2007 and is expected to go up many folds since commodity markets would remain friendly to its subscribers.

The daily average volume of trade in commodities exchanges by December 2007 was over Rs.120 billion ($3 billion), said Mr. Jindal.

Gold, silver and crude recorded the highest turnover in MCX while in NCDEX, soya oil, guar seed and soyabean and in NMCE pepper, rubber and raw jute were the most actively traded commodities on an average. This trend is likely to continue.

The study points out that futures trading in commodities results in transparent and fair price discovery on account of large-scale participation of entities associated with different value chains.

This reflects upon the views and expectations of a wide section of investors related to that commodity.

It provides an effective platform for price-risk management for all segments of players ranging from producers, traders, processors, exporters/importers and the end-users of a commodity.

 

 

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