India is among the top-5 producers of most of the commodities, in addition to being a major consumer of bullion and energy products. Agriculture contributes about 22% to the GDP of the Indian economy. It employees around 57% of the labour force on a total of 163 million hectares of land. Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major centre for trading of commodity derivatives.
|Cash VS Futures Market Trading|
|Futures are traded on a stock exchange||Forwards are non tradable, regotiated instruments|
|Futures are contracts having standard terms and conditions||Forwards are contracts customized by the buyer and seller|
|No default risk as the exchange provides a counter guarantee||High risk of default by either party|
|Exit route is provided because of high liquidity on the stock exchange||No exit route for these contracts|
|Highly regulated with strong margining and surveillance systems||No such systems are present in a forward market.|