[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

V. Shunmugam D.G. Prasad
Chief Economist
Economist
Multi Commodity Exchange Of India Ltd., Mumbai
Commodity Futures: A Catalyst For
Agricultural Development
“Everything else can wait but
not agriculture.”
-Pandit Jawaharlal Nehru
Historically, India has been considered
an agrarian society;
the fact that the basics of our
culture and lifestyle have been derived
from it stands testimony to our historical
dependence on agriculture. Of late, the
relative share of agriculture during early
1990s declined significantly due to its
sagging growth and leaping progress in
the other sectors. Currently, services
sector had become the largest contributor
to the GDP and the agriculture sector
had become the least contributor
with its share of below 20 percent. The
reality is India cannot afford to neglect
the agriculture sector and back pedal on
reforms related to this sector with about
two thirds of its population still directly
or indirectly dependent on it, especially
with apparent imbalances in the commodities
economy making the policy
choices narrow for the decision makers.
At this point in time the high agricultural
commodities prices combined with
poor supply chain efficiency in the country
affecting all sections of the society
especially with the common man bearing
the brunt of it. Despite the reports
of high commodity prices at the retail
end, farmers today are still complaining
about stagnant prices at the market they
sell. This could lead to the risk of many
shifting their profession, often abandoning
farming activities.
Agrarian Challenges
At the current situation of limited availability
of resources, the country, indeed,
requires a paradigm change from increase
in production to improvement in
the input-use efficiency, to enhance our
competency in the agriculture sector.
Given the current constraints of poor
realization from agriculture and hence
their poor investment in technology and
lack of investment in infrastructure
leading to the operation of a vicious cycle
in the farming sector. This is not to
say that those who command resources
for example the large landholders were
able to overcome the operation of this
vicious cycle with their sheer bargaining
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