Agricultural Commodity Derivatives

India being predominantly an agricultural economy, commodities plays a significant role. In the wake of Government's liberalization of the futures' trading in commodities in the mid 1990s, commodities trading initially witnessed an increasing momentum in activities. However, the introduction of future trading in the selected agricultural commodities had apparently led to increase in the price of the commodity and its volatility. Food grains have seen incisive inflation until recently, and the prices in the open market have not come down much from woozy altitudes to which they had climbed. On the other hand, the corporate house and the commodity brokers blame that the commodity derivatives markets face slew regulation on futures trading despite any reliable statistical evidence. This paper inquires about the effect of futures price on the spot price in an emerging commodity derivative market context, and panel data analysis was attempted to test the effect.