FM worried about speculative money entering commodities

Finance Minister P Chidambaram said the Jaipur terror attack would not affect the investment climate in the country, reports CNBC-TV18.

He said global conditions would lead to moderation of growth. "Inflation may remain high for sometime. We are still confident of clocking over 8% growth this fiscal."

The government is concerned about the rising food and commodity prices. In an exclusive interview to CNBC’s Erin Burnett, the Finance Minister said tackling inflation is on top of his agenda.

“India's biggest challenge now is inflation. Since the credit and the capital markets have witnessed turbulence, it seems that speculative money has moved into the commodities market. We are very concerned about the relentless rise in crude oil prices, commodity prices and food prices. Food prices have also been on the rise, because of the foolish diversion of food to fuel. We are directly affected by these price increases. We are a developing country and a large proportion of the people are still poor. Rise in prices, especially of food and commodities sets us back quite a bit,” said Chidambaram.

The FM is concerned about speculative money moving into commodity markets. "I am disappointed that the Sen panel on commodity futures trading could not reach a conclusion. It is difficult to say if we will ban more commodity futures."

According to Chidambaram, all tax exemptions are to be reviewed periodically. "Diversion of food for oil will set us back," he added.

Chidambaram also defended the ban on futures trading on commodities saying this is a temporary measure.

“Intellectually, there is no arguement for banning futures trade. The Committee that went into it did not reach any conclusion. It said that we have no conclusive evidence that futures trade is fuelling a price rise. But the same Committee said that the current ban on four commodities should be continued. That gave rise to a demand that we should ban more items. On the commodities exchange, virtually every political party has made that demand. The BJP, which introduced futures trading, has made that demand. So, in a democracy in the absence of conclusive evidence we have to heed the advice of others. Therefore, we have suspended for a period of four months trading in four more commodities,” he added.