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India to ban food futures trading outright?

India is mulling imposing a blanket ban on trading in futures in food commodities, as the government attempts to control surging price inflation.

The move has been proposed by India's finance minister Palaniappan Chidambaram who told delegates at the Asian Development Bank's meeting in Madrid yesterday that the country is “facing a very grave crisis on the food front”, the Financial Times reports.

India already forbids futures trading in wheat and rice, having introduced the move in response to worries over the part hedge funds and financial market traders have played in the recent rises recorded by commodities.

Cameron Brandt, global markets analyst at EPFR told Marketwatch: “It's indicative of the fact that there's a real issue here and governments are scrambling to find some kind of solution.

“I don't think it’s a great idea especially given that their food futures market is especially modest. If you take that away, you lose pretty important market signals.”

News of the proposed ban comes as the rate of inflation in India surged to 7.57 per cent in the week ending April 19th.

This represents the highest figure recorded for 42 months.
Source: LSE

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