Estimates of Gross Domestic Product for the Second Quarter (July-September) of 2018-19, Ministry of Statistics and Programme Implementation Click here

Mandi

From Arthapedia
Jump to: navigation, search

Mandi in Hindi language means market place. Traditionally, such market places were for food and agri-commodities. However, over time the coverage of mandis got widened to include trading hubs for grains, vegetables, timber, gems and diamonds; almost every tradable was included. Mandis for animals like cattle, goats, horses, mules, camels and buffaloes, and poultry are often organised as fairs. Thus the word mandi assumes the contours of a catch-all market place where anything is bought and sold.

In a still predominantly rural India, mandis form part of the life-line infrastructure for the people. In most of the states/provinces in India, the Agricultural Produce Marketing Committee(APMC)[1] operates the wholesale market for agri-products. Wholesale markets are segregated depending on the type of commodity handled: for instance, for grains, pulses, vegetables, potato and onion, spices and condiments, fruits. The growing disenchantment with the functioning of APMCs has led to relaxation of the APMC Rules and the emergence of direct marketing in agri-commodities. These are often called farmers markets: inthe state of Andhra Pradesh they are called ‘Rythu bazaar’[2] and in Tamil Nadu ‘Uzhavar Sandhai’[3] .These markets enable the farmer to sell his produce directly to the consumers without the middlemen in the APMCs. Minimising intermediation and the creation of a national common market are long cherished policy goals of the government.


Tezi mandi or Futures markets

India is known for commodity forward and futures markets that existed for centuries though standardised, regulated futures trading has a history of over a century only. Unregulated futures markets are often called Satta Bazar.

Futures markets are auction markets in which participants buy and sell futures contracts for delivery on a specified future date. Trading used to be carried out through open outcry- yelling and hand signals- in a trading pits[4] .However, since the early 2000s most of the commodity futures exchanges have migrated to the new technology platform of online or electronic trading. The commodity futures markets are regulated by the Forward Markets Commission[5]. Through the Finance Act, 2015, Forward Markets Commission has been merged with the securities market regulator - SEBI.


Market Imperfections and Prices

India is a huge agri-nation with shortages and surpluses. But a national common market is a far cry. Further, there is also wide discrepancy in the prices at various levels. Price heterogeneity could be largely because of information asymmetry existing in the markets; quite similar to the market for lemons. However, the latent demand for the commodities ensures that Gresham’s law does not prevail, and commodities, which are graded by quality, are sold at all prices. Owing to this, food inflation in India did not quite follow the peaks and troughs experienced in the global markets. The year 2008-09 was a watershed year in terms of the volatility in prices that was witnessed in global prices; when global commodity markets went through a roller-coaster ride, with prices sharply rising during the first half and having a free fall in the second half and culminating in a recessionary phase. Although the Indian market was spared the volatility, it became evident in 2010-11 that price levels of essential commodities had moved on to a higher trajectory.


Creation of a common market

Government has been working on the issues for internal trade reforms and making a common market for agriculture products across the country since 2012[1]. Setting up of Spot Exchanges, was an attempt towards creation of a single market in the agricultural commodities in pursuance of the national agenda given by the Prime Minister in his address at Agricultural summit in 2005. The Department of Consumer Affairs had conceived spot exchanges as an alternative marketing channel which would facilitate a transparent system of direct marketing. It was felt that direct marketing will ensure that there is no credit and quality risk resulting in low transaction costs. It was also to integrate the physical market spatially and temporally by integrating it with the futures market. However, spot exchanges soon landed up in trouble and the permissions were withdrawn in September 2014.


Creation of National Common Market in Agricultural Commodities has found further impetus in the Union Budget of 2014-15 and 15-16 and in the Economic Survey of 2015-16.

1. Source: PIB release of Ministry of Consumer Affairs, 18 October 2012

References

  1. http://agricoop.nic.in/FINAL%20Model%20Rule%20as%20corrected%20on%2007%2011%2007.pdf
  2. http://market.ap.nic.in/npage/rbz.htm
  3. http://www.tnsamb.gov.in
  4. Read more: http://www.investopedia.com/terms/f/futuresmarket.asp#ixzz1Zi2vUOER
  5. http://www.fmc.gov.in
  6. http://en.wikipedia.org/wiki/Gresham's_law#cite_note-0


Contributed by

Personal tools
Variants
Actions
Navigation
Concepts
Share Tools
Toolbox
Translate