Marking Time Reviewed work(s): Source: Economic and Political Weekly, Vol. 3, No. 3 (Jan. 20, 1968), pp.

209-210 Published by: Economic and Political Weekly Stable URL: http://www.jstor.org/stable/4358161 . Accessed: 25/01/2013 17:33
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ECONOMIC AND POLITICAL WEEKLY the issue of hedge trading soon after the announcement of decontrol from the beginning of the season. But quite apparently, the Association had been looking for a more suitable opportunity. This has now been provided by the recent fall in prices. Cotton prices have come down by Rs 75 to Rs 200 per candy from the record high levels reached during the last few months of 1967. Prices are expected to ease further with the progress of the marketing season. The movement of Guijarat cotton will be getting into full swing very soon. Foreign cottons have also started arriving and there have been reports of US short staple cotton being sold at a considerable loss. Whether hedge trading facilitates the smooth marketing of a commoditv remains a moot point. The critic couild easily ask whether the marketing of cotton had been adversely afTected during the last two seasons by the absence of hedge trading. And if the consideration be that of prices, current prices of cotton are still well above the ceilings for 1966-67. But if the Government is reconciled to hedge trading in a nunlber of commodities like castor, linseed, cottonseed, unginned cotton, black pepper, etc, there can be no justification for not allowing futures trading in cotton, especially when it has been decontrolled. Indeed, very few commodities can qualify for hedge trading so well as cotton, groundnut and mustardseed; futures trading is now denied in these very commodities. Strange are the ways of the Government.

January 20, 1968 at the procurement price regardless of the quantity offered caused a big flutter in commodity markets. The Union Minister for Food and Agriculture will have only himself to blame for the likely failure of the procurement drive because of his indiscreet pronouncement. Ard it will indeed be a pity if consumers are unable to enjoy the full benefit of bumper crops and have to pay high prices for food. The oilseeds market has, however, been encountering considerable resistance at higher levels because of the substantially improved supply position this season. If all goes well, the production of the five major oilseeds might well exceed 90 lakh tonnes as against 65 lakh tonnes in last season, Minor oilseeds are expected to yield over 7 lakh tonnes. One can also count on increased supply of cottonseed oil. What is more, increased domestic supply is being supplemented by the import of over 1.40 lakh tonnes of soyabean oil. While there are far too many factors influencing the course of prices and it is not easy to assess their impact, one could say with a measure of confidence that even during the lean months oilseeds prices are unlikely to rise to any where near the highest levels reached last season. But it is also necessary to bear in mind that current price. already reflect to a considerable extent the improved supply position. Even a casual look at the table showing move-

Marking Time
THE oilseeds market has been maiking time recently. The lowest prices recorded towards the end of December have, by and large, been well held. Prices have, in fact, hardened all-round. Castor futures have rallied from Rs 123.50 to Rs 131.87 a quintal, linseed futures from Rs 133 to Rs 143 a quintal and groundnut oil ready from Rs 28.60 to Rs 30.75 per 10 kilograms. *rhe fall in December had been too steep to continue without necessary technical adjustments. Apart from technical consideratioits, trading sentiment was aided by reports of renewed export inquiry in castor oil and the cold wet spell in north India which is feared to have caused some damage to the rabi crops. But it is quite likely that the market's performance might have been very different if Jagjivan Ram had not come to the rescue of bulls. His statement from Poona that under no circumstances would foodgrain prices be permitted to fall below the procurement prices (these are very much higher than the official support prices) and that he had instructed the, Food Corporation to buy foodgrains

OF MOVEMENT OIL AND OILSEEDS PRICES

(Rs)

1966 Low High Close High

1967 Low Close

Jan 12, 1968

Groundnut Karad Bold (100 kgs) Groundnut Oil ( 10 kgs) Linseed Bold (100 kgs) Linseed Oil ( 10 kgs) Castorseed (100 kgs) Castor Oil Commercial (10 kgs) Cottonseed Berar White (100 kgs) Cottonseed Oil (10 kgs) Mustardseed (100 kgs) Mustard Oil (10 kgs)

153 33.70 126 28.25 97 20.75 60 30.25 130 30.0

259 55.75 188 42.75 149 37.50 90 52.50 190 41.40

207 43.60 187 42.75 148 37.25 84 42.25 172.50 40.75

237 47.50 200 46.50 174 39.50 94 47.25 170 46.90

132 28.60 150 31.50 116 25.75 60 23.75 205 38.80

134 29.0 156 32.75 123 28.75 68 27.25 170 39.62

140 28.80 155 33.50 128 30.0 69 26.75 182.50 42.88

209

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January 20, 1968 ments in prices over the past two years will bring home this point. The movement of the groundnut crop is in full swing and with the continuing pressure of arrivals, prospects of any marked and sustained recovery in prices are generally discounted. But the scope for a further big fall in prices also seems limited as the season will soon have passed its peak and because of the likely resistance of growers to lower prices. Groundnut oil has already registered a substantial decline; it was quoted around Rs 4,600 -a tonne in January 1967 and is now available around Rs 2,900.

ECONOMIC AND POLITICAL WEEKLY ment will have only itself to blame if bumper crops do not produce any significant impact on commodity prices. And if cost of living does not conic down appreciably in a year of good agricultural production, public discontent is bound to increase and this would manifest itself in industrial unrest with inevitable repercussions on industrial production. The stock market has thus to contend with several economic and political uncertainties. T'Ae few prominent bull operators who are known to have been dominating markets for a long while are now developing symptoms of indigestion. The positions that these operators have accumulated in certairn scrips such as National Rayon, Indian Iron, Tata Engeneering and Tata Steel cannot but cause serious concern. The authorities are not unaware of this hut they seem quite helpless against the skilful manipulation by the big operators.

was perhaps the fear that curbs on American investment abroad, part of the Johnson Administration'sprogramme for protecting the dollar, might affect the flow of US capital to [ndia, even though Washington has been quick to point oul that these restrictive measures are directed mainly against developed countricv; having a payments surplus. The US has however, already announced its decision to cut aid to developing countries. The World Blank has raised its lending rate from 6 per cent to 6.25 per cent and out of the pledged credit of $900 million for the current fiscal year, the members of the Aid India Consortium have made firm commitment of only The outlook for castorseed depends $352 million so far. These developmainly on the flow of overseas inquiries. ments could not have gone unnoticed by Prospects of export business in castor the market. oil are considered to be reasonably proBut what is worrying the stock market mising. Outstanding sales up to March most is pc rhaps the tight budge.taryposiend are placed around 8,500 tonnes. tion. Calculations about the last CeniExport business should have a stabitral Budget have been completely upset lising influence on castor prices. But and the current fiscal year is expected castorseed could drift lower in sympathy to end with a huge deficit of over with linseed and mustardseed which Rs 400 crores. In view of his avowed are in a vulnerable position. Unless dislike for deficit financing, it would be weather turns unfavourable and crop interesting to see how Morarji Desai ideas have to be revised downward, prices can be mobilises resources to finance the maslinseed and mustardseed sive development effort which is necesexpected to seek lower levels. These mar- sary to accelerate the pace of growth. crops will start moving into the With the resources position being what ket only after March. it is, it is scarcely surprising that the Fairly good business is reported to stock market should not have been able have been put through recently ini to derive any comfort from the Finance groundnut extractions, mostly with tlhe Minister's promise to simplify and Communist countries. Export business rationalise the tax structure in the forthin cottonseed cakes has been extremely coming Budget. Morarji Desai does not restricted because of the discontinuance share the popular view that corporate of incentives from the new year. It taxation is heavy. Nor is he in favour should not be difficult, however, to put of taxing incomes of agriculturists through business in course of time even because they have "a larger pull in elec without the incentives. tions". On the other hand, he has been asking industrialists not to think always of profits.

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A VERY disappointing start indeed. The stock market has been on the retreat, in search of some safe shelter. It has already moved down tc slightly below last year's low and there is no indication yet that it has come to the end of its downward journey. The present situation is in sharp contrast to the one that prevailed in Janua-rylast when the market hit its year's peak. Several influences have been at work to further undermine the morale of the market which has been ailing since long. What made for the shaky start
210

While showing some signs of improvement, the economic situation continuies to be extremely difficult. There is perhaps nothing but the prospective bumper crop on which one can base one's hopes for economic revival. But with the political atmosphere charged with tension and lawlessness, the stock market is unable to share Morarji Desai's optimism that the worst is over and that things will improve. The difficulties that the country is experiencing are not just those which are inherent in the growth process of a developing economy. Many of them are of the countrv's own making. The Governl

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