Just a strawman

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In 2006, when prices were accelerating, every month the Union finance ministry played out a game of cut and snip. Import and excise duties on crude oil, for example, were cut till there was nothing more to cut. This year, the government has zeroed in on futures as a convenient scapegoat for the price rise. The reactions are based on the institutionalised logic that the government must be seen to be taking action every weekend, once the latest inflation numbers come out and angry voices are aired from assorted quarters. Thus, late on Wedensday, the government decided to suspend futures trading in rubber, soya oil, potato and chana— for four months. This is the third instance of a futures trade ban in the last 15 months. The government had banned such trading of pulses like urad and tur in January 2007, which was extended to rice and wheat the very next month. Now the list has been extended. The immediate effect has been not on prices, but on rumour mills. Word of more commodities like zeera and edibile oils coming under the ban has gained a measure of credence. The impact will not end there. Volumes in India’s commodity exchanges, which saw their turnover rise only a few months ago after being empowered by new legislative measures, will register a decline. It will make price discovery harder. Ironically, voices of protest are coming from rubber traders in Kerala, traditional supporters of the Left parties. They oppose the ban on rubber futures. Up north, potato farmers in Uttar Pradesh and West Bengal are also upset because they stand to miss out on better prices for their produce.