Excessive Speculation and Market Manipulation: The Guar Futures Trading Fiasco

By Kavaljit Singh | Briefing Paper # 8 | September 2012

The recent guar trading scandal gives a peek into the murky world of Indian commodity futures markets and reveals how commodity exchanges are acting like casinos for speculators, moving away from their avowed objectives of price discovery and price risk management in an efficient and orderly manner. Guar (Cyamopsis tetragonoloba) is a drought resistant crop grown mainly in Rajasthan and parts of Haryana and Punjab.

Guar seed and guar gum prices rose at an extraordinary rate during the six months period between October 2011 and March 2012. On October 1,…

Renegotiating India’s Investment Agreements: A Policy Perspective

By Prabhash Ranjan | Briefing Paper # 7 | August 2012

There has been an exponential growth in International Investment Agreements (IIAs), signed by countries to protect foreign investments, in the last two decades. IIAs are treaties signed at the bilateral, regional or multilateral level by two or more countries to protect investments made by investors of respective countries. IIAs protect investments by imposing conditions on the regulatory behaviour of the host state.

This briefing paper examines the broad substantive provisions of Indian IIAs and suggests how these broad provisions can be narrowed so as to allow India exercise its regulatory space freely. The paper calls for renegotiating some of the…

Should Banks Be Allowed in Commodity Futures Trading?

By Kavaljit Singh | Policy Brief # 1 | August 2012

It may sound surprising to some people, but it’s true that banks are not allowed to trade in commodities in India. The banks are allowed to trade in financial instruments (such as shares, bonds and currencies) in securities market but the Banking Regulation Act of 1949 strictly prohibits banks (both domestic and foreign) from trading in goods and therefore they are not allowed to trade in commodity futures market.

The Section 8 of Banking Regulation Act clearly states that no bank…

Should India Establish a Sovereign Wealth Fund?

By Kavaljit Singh | Briefing Paper # 6 | November 2011

New Delhi will soon take a final call on the issue of setting up of a sovereign wealth fund (SWF). The idea of setting up an Indian SWF has been going around since 2007 when China established its major sovereign wealth fund, China Investment Corporation (CIC), with an
initial capital fund of $200 billion. However, this time the proposal has received strong support from India’s corporate leaders who recently suggested the establishment of a state-owned SWF primarily to secure access to natural resources and pursue strategic investment opportunities overseas.

With the strong backing of corporate leaders, a SWF may soon be a reality and India will…

The Pitfalls of FDI in Multi-Brand Retailing in India

By Shekar Swamy | Briefing Paper # 3 | October 2011

There is a growing pressure on policymakers from foreign governments and big retailers to permit foreign direct investment (FDI) in multi-brand retail in India. At present, India allows 51 percent FDI in single-brand stores (e.g., Apple) and 100 percent FDI in cash & carry and wholesale trading. The retail trading by foreign multi-brand retailers (e.g., Wal-Mart Stores) is prohibited under the current regulatory regime.

The Committee of Secretaries has recently recommended that the sector be opened, with some riders that are easy to meet….