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Futures and Prices



Futures and Prices

his refers to your editorial on essential commodities (August 19, 2006). You surprisingly attribute the recent rise in the prices of essential commodities to the speculative propensity of the large trading firms and the consequent huge volume of trading on commodity exchanges. Actually, futures markets in agricultural commodities at present lack adequate speculative business and, as a result, are by and large illiquid. True, such illiquidity may render them susceptible to manipulation. But since the future contracts traded in these commodities are mostly local in character, these have little influence on commodity prices all over the country.

As it is, futures markets in essence discover prices and do not determine them. The basic underlying forces of supply and demand actually determine prices, futures or spot. Futures markets have merely highlighted the current shortages in major agricultural commodities like wheat, pulses and sugar. In times of shortages, prices will rise, whether futures markets exist or not.

Incidentally, your suggestion of “bringing back the ‘control orders’ in the Essential Commodities Act”, reminds us of the three decades since the mid-1960s, when futures trading was prohibited and such control orders, coupled with the selective credit controls, were the order of the day. As is known, these measures then proved counterproductive and commodity prices rose so sharply as to end in double-digit inflation for a long time, bringing in stagflation in the economy. It would therefore be naïve to revert to such policy at a time when we actually need efforts at broadening and deepening the derivative markets in commodities through appropriate amendments to the obsolete Forward Contract Regulation Act, 1952.

You have rightly scorned at the “demat” buffer stock policy within the framework of futures trading, suggested by some. Such a policy is no remedy for the government failure to achieve the physical procurement target. The government entry into futures markets will only provoke a further rise in prices, especially since most markets are thinly traded. A futures market functions best not with government entry, but without its participation. Its role should be confined to efficient regulation, which task the Forward Markets Commission is performing quite admirably. Its hands require to be strengthened further.



NET, Researchers and Teachers

his is in response to the article ‘Riot of Researchers: UGC’s Alternative Adds to the Chaos’, (August 19, 2006). While I completely agree with the views of the author, regarding the implications of the exemption from NET granted to MPhil and PhD degree holders, there are some other perspectives as well.

If an examination format is such that qualifying in it becomes more of an exception rather than the rule, serious thought needs to be given to the examination structure and content in order to match the expectations of the examiners with the actual abilities of the candidates. Come to think of it, if very few students qualify in NET, does the fault not lie with the educational system, which trains and awards them degrees? The current academic structure is exam-oriented and even marks-oriented to a great extent. Superficial degrees and inflated mark sheets leave little room for developing in-depth knowledge and insight in the subject amongst the students. The need, therefore, is not to look for ways of circumventing the NET examination but introspection on the part of the students as well as teachers as to why the success rate in NET is so low. Reform

(Continued on p 3904)




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Economic and Political Weekly September 9, 2006


(Continued from p 3826)

in the format of NET is called for. Some suggestions for this purpose are:

(i) Currently, the question paper for Lecturership and Junior Research Fellowship is common. However, there is a basic aptitudinal difference between a good researcher and a good teacher. While a good researcher needs to be good in analytical ability and conceptual clarity, a good teacher needs these qualities only in a limited measure. In fact, he or she needs to be an effective communicator who can deliver well in the class and ignite the spirit of inquiry amongst the students. Sadly, the NET format does not give any weightage to this aspect. Ideally, NET should also consist of a practical lecture demonstration from the candidate which should carry sizeable weightage

(ii) The current framework of NET also does not test the candidate’s overall personality, including her extracurricular achievements, organisational ability and administrative acumen. In fact, a candidate strong in these areas could be a great asset to the institute that he or she joins. It could add to the pool of talented individuals who would eventually rise to the top of educational institutions. Sufficient weightage to overall personality and extracurricular achievements is, therefore, a must.

(iii) The NET framework completely ignores the work experience of the candidate and puts a fresher at par with an experienced teacher who has worked on a low salary on ad hoc or part-time basis for years. Sufficient weightage should be given to teaching experience because a good teacher is not only the one who possesses a bagful of degrees but also the one who continues to learn each day.

(iv) The syllabus for NET should be in line with those of regional universities, which in turn should revise their syllabi frequently.


Sardar Patel University, Vallabh Vidyanagar

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