India suspends 4 commodity futures on price worries

By Sourav Mishra

MUMBAI (Reuters) - India has suspended futures trading in four commodities with immediate effect in its latest move to rein in soaring inflation, but industry officials said the step would not ease price pressures.

India has taken a series of fiscal measures to bring down prices recently, and the commodities market regulator said trading in futures contracts in soyoil, potato, chana or chick pea, and rubber had been suspended for four months.

The government, facing state and national elections in the next 12 months, is keen to show it is tackling rising food prices, which contributed to a surge in annual inflation to 7.57 percent in mid-April, its highest in more than three years.

"There was a perception in some political quarters that futures trading in agri commodities are responsible for a price rise in the spot... which led to suspension of four commodities," B.C. Khatua, chairman of the market regulator, the Forward Markets Commission (FMC), told Reuters on Thursday.

The ruling coalition's communist allies urged a ban on futures trading, saying it stokes inflation, and the government took the step although a panel it appointed found no clear link between futures and rising spot prices in a report in April.

Soybean, rapeseed or mustard seed, guar seed and turmeric prices and volumes picked up as investors switched out of the suspended contracts.

The September soybean contract closed up 2.9 percent at 2,160.5 rupees ($51.7) per 100 kg and the July rapeseed contract rose 2.5 percent to 581.65 rupees per 20 kg.