Linking farmers to futures market in India

Currently, farmers’ share in the overall agri-futures trading in India is negligible. There could be several factors behind this ranging from their lack of understanding how futures markets work to constraints emerging from lack of liquidity or even fulfilling regulatory requirements. But linking farmers to futures markets can be mutually beneficial to both- the markets and the farmers. It can help farmers in better price discovery and hedging their price risk while taking planting decisions based on future prices rather than last year’s prices, and also provide more liquidity to markets for their deepening. It is with this idea in mind that this study is undertaken to identify constraints in participation of farmers/farmer groups in futures markets, and how best to resolve them. Accordingly, it also looks at some selected Indian case studies and experiences in some other small holder economies, especially China, to learn best practices that can help increase farmers’ participation in futures. This study assumes special significance in the wake of Union Finance Minister’s commitment to create 10000 new FPOs in the next five years.

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