Shenzhen markets validate this finding. A study examining the impact of increase in security transaction tax from 0.1% to 0.125% in India finds that as a result of this increase in taxation the traded volume declined by 25%, though the impact on the volatility of returns remains inconclusive. No doubt, CTT will reduce the competitiveness of Indian commodity markets, making the economy bereft of a low-cost risk management platform in non-agricultural segments like bullions, base metals, energy, etc, potentially rendering many SMEs (who are direct and indirect beneficiaries from the commodity exchange platforms) ‘unproductive’ in the process. The need of the hour is to bring in vibrancy in commodity markets as vibrant markets give signals about the future state of the markets and economy.
The author is professor of economics, Department of Business Economics, University of Delhi, South Campus