Ever since the dawn of civilization commodities trading has become an integral part in the lives of mankind. The very reason for this lies in the fact that commodities represent the fundamental elements of utility for human begins. The term commodity refers to any material, which can be bought and sold. Commodities in a market’s context refer to any movable property other than actionable claims, money and securities. Over the years commodities market have been experiencing tremendous progress, which is evident from the fact that the trade in this segment is standing as the boon for the global economy today. The promising nature of this market has made them an attractive investment avenue for investors.
In the early days people followed a mechanism for trading called barter system, which involves exchange of goods for goods. This was the first form of trade between individual and even nations. The absence of commonly accepted medium of exchange has initiated the need for barter system. People used to acquire those commodities which they lacked in exchange of those commodities which are in excess with them. The commodities trade is believed to have its genesis in samurai. The early commodity contract was carried out using clay tokens as medium of exchange. Animals are believed to be the first commodities, which were traded, among individuals. The internationalization of commodity market integration that occurred after the European voyage of discovery during the 15th century. The development of international commodities trade is characterized by the increase in volumes of trade among the nations and the convergence of price related to the identical commodities in different markets. The major impetus for the commodities trade was provided by the changes in demand patterns, scarcity and the supply potential both within and across the nations.
Coming to Indian scenario, despite a long history, despite a long history of commodity markets, commodity markets in India are still in their initial stages of development. The reasons for this can be initial stages of development. The reasons for this can be attributed to stringent regulatory innervations, intermediate ban on commodity trading and policy innervations by the government. Commodity markets have a huge potential in the Indian context particularly because of agriculture liberalization, commodities’ trading in India has gained increased momentum in activities. To increase the efficiency of the markets the forward Markets commission (FMC), the governing body of commodities trading in India, has taken several initiatives for the establishment of national level multi-commodity exchange in India. These exchanges serve as platforms for facilitating transparent trading in multiple commodities, electronic delivery systems and efficient regulatory mechanism, creating a world class environment for Indian traders. In order to sustain the increasing volumes in commodities trade, the need for proper clearing and settlement systems, warehousing facilities and efficient pricing mechanisms have been identified. With the recent boom in commodities markets, Indian participants are gearing up for exploiting the potential opportunities in future.
Commodity markets are of great help not only for their participants but also for the economy as a whole. The twenty year bear market for commodity has drastically reduced the prices of many commodities to their lowest levels. The present shift in trend in commodity trading coupled with the global increase in demand will certainly hold a promising future for the investment in this segment. Since 2003 Indian market is in the evaluation and development of commodities markets and their significance in the arena of strategic investment.
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