One of the apex industry body, Assocham has estimated that Indian commodity market would grow at a steady speed of about 30% by 2010 and touch a volume of Rs.74,156,13 crore.
Commodity market in the country has already expanded by 50 times in a span of 5 years from Rs.66530 crore in 2002 to Rs.3,3753,36 crore in 2007. In 2003, the size of commodity market was Rs 129,364 crore which increased by 341% to be at Rs.571759 crore in 2004. In 2005, the growth in commodities trade was by 276% pushing up the market size to Rs.2,155,122 crore. However, in 2006, though the commodities trade increased to Rs.2,739,340 crore, it could register year on year growth of 27% over the previous year. In 2007, the market size increased to Rs.33,753,36 crore and registered a growth of 23%.
The Assocham study further 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.7415613 crore 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, according to Assocham
The daily average volume of trade in commodities exchanges by December 2007 was over Rs.12,000 crore. 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 would continue, the Assocham study observed.
The study advocated 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. The delivery and settlement procedure differs for each commodity in terms of quality implications, place of delivery, options, penalties and margins, and are defined comprehensively by the exchanges. Members of an exchange can perform and clear transactions in only those contracts which are exchange specified and approved by the Forward Market Commission (FMC).
Assocham urged that the institutional and policy-level issues associated with commodity exchanges have to be addressed by the government in coordination with the FMC with a view to pave the way for a significant expansion and further development of the commodity futures markets. The major problems like infrastructure, trading system, broking community, controlled market, integration of regional and national exchanges as also integration of spot and futures markets should be addressed.