2 Why Are Commodities Critical for India’s Economic Growth

Topics: Commodity market, Investment, Commodities exchange Pages: 1 (261 words) Published: November 17, 2012
Commodity Market: Commodities are becoming critical for fuelling India's economic growth. Investment in commodities not only has a balancing effect on the portfolio, but also acts as a natural hedge.

India is finally beginning to get noticed by the world at large. Rising incomes, growing population, soaring foreign exchange reserves and economic liberalization policies make India an attractive destination for overseas investors and businesses. Indeed, India is emerging as an asset class. Growth is driven by domestic consumption and investment, plus gains from integration with the global economy through exports and capital flows.

It is widely accepted that the inflows from the Foreign Institutional Investors are primarily due to the much touted 'India growth story', which pegs India as an alternative to China as an equity investment destination. Resultantly, there have been huge inflows from countries such as Japan, Korea and Taiwan into the Indian equity market.

Asset Classes:
Fixed-income instruments and equities are popular.
With limited supply and growing demand, real-estate is emerging rapidly as an asset class. •Commodities are a new entrant into this category of investment options. Art too is catching investor fancy. Commodity trading in India resumed in 2003 through:

Multi-Commodity Exchange of India (MCX)
National Commodity and Derivatives Exchange(NCDEX)
Commodity exchanges have seen an exponential growth. In the last fiscal, that is, 2010-11 the total turnover of the Indian commodity markets was approximately Rs.112.52 trillion, an increase of more than 50% as compared to the year 2009-10. Following picture shows the growth of commodity market in India.
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