Friday, May 9, 2008

Miscellaneous: Commodities futures, FDI, Exchange-traded funds

The following are some key developments in the corporate sector over the last couple of days that are worth noting:

1. Commodities Futures

We had earlier discussed on this blog the preliminary findings of the Expert Committee under the chairmanship of Dr. Abhijit Sen, which failed to find a clear causation between commodity futures and the price rise in agricultural commodities. However, the Government seems to have overruled the findings in a sense when it banned futures trading in 4 commodities, being chana, soya complex, rubber and potato. This decision is not altogether uncontroversial, considering that there have been calls for a consistent futures policy. Further, the Dr. Sen committee has itself expressed its concern over the decision. The move is also likely to largely affect the trading on the commodities exchanges.

On a separate note, S. Gurumurthy presents a critical view about commodities futures and the Sen Committee findings.

2. FDI in Retail

The Hindu Business Line reports that there is unlikely to be a Government decision on the permissibility of foreign direct investment in retail trade in the near future.

3. Exchange Traded Funds

The Hindu Business Line has a column that explains this concept, which is slowly gaining popularity.

4. US-India Investment Norms

The Economic Times reports:

The US is putting pressure on India for a level-playing field for American companies investing in the country. Washington is pressing for a national treatment to US companies in the bilateral investment treaty (BIT) currently being negotiated.

A national treatment would place US investors on par with Indian investors and they may not have to adhere to the stringent guidelines laid down by the Foreign Investment Promotion Board (FIPB).

The US also wants India to agree to subjecting investment disputes between the two countries to international arbitration. While India has been resisting the proposals, the US is keen that the two become an integral part of the treaty.

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