A Study on Impact of Commodity Future Prices on Inflation in India

Abstract

Commodity markets are experiencing unprecedented growth in India since their re-introduction in 2002. Indian commodity exchanges like Multi Commodity Exchange (MCX) have already established themselves on global front. Gold is one of the dominant commodity traded in India as well as around the globe due to its growing importance as an investment avenue and as a hedge against the recessionary trends.lt is experiencing considerable volatility in its prices because of the international markets. The efficiency in price realisations is an essential requirement for any market and the same needs be brought in by building confidence in the minds of the people. In this context the present paper aims to study the efficiency of Gold futures contracts and their impact on inflation. The statistical tests like Augmented Dickey Fuller Test, Phillip-Pherron Test and granger causality test are conducted to evaluate the efficiency of the future markets. The outcomes of the analysis reveal that there is a significant causality relationship between Future and spot markets. For gold which proves that the future markets are efficient and future gold prices not influencing on inflation. The inflation is effecting on future and spot gold prices.