Professional Documents
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Major Agreements for Textile and Leather
Industry
Y Agreement of § i.e. free market access
to products and reduction of tariff and non-tariff
barriers.
Y Agreement to have Ä
§
If there is
an import surge and it is liable to affect the domestic
industries in the transition economies.
Y Õirect reduction of Ä
Y
: These are supposed to have
a positive impact if they help the industries and
negative impact if they reduce the cost
competitiveness.
Textile Sector
Y Textiles and clothing accounts for around 30% of
India¶s total merchandise exports.
Y Exports go mainly to the European Union and the
United States, both of which maintain restrictions
under the Agreement on Textiles and Clothing (ATC).
Y To improve sector¶s competitiveness, a number of
measures have been taken
1.These include removal of some textiles and
clothing products from the list of items reserved for
the small-scale sector, and removal of foreign equity
restrictions
2. The new Textile Policy also acknowledges the
need to restructure, or close down, non-viable units.
Agreements in Textile Sector
Y Prior to 1995,trade in textile sector was subject to bilateral
quotas negotiated under the Multifibre Arrangement.
Y Since 1995,trade in textiles and clothing governed by WTO
rules. Implementation was done in phase.
2002:
1998:
:
.
.
Agriculture-WTO Agreements and Government
Initiatives
Y Rules to govern agri trade which will lead to improved predictability and
stability for importing and exporting countries.
Y Provisions to encourage the use of less trade-distorting domestic support
policies to maintain the rural economy.
Y Ä
allows the imposition of additional duties
when there are import surges above a particular level
Y Policy guided by domestic supply and self sufficiency considerations
Y Price controls are maintained for staples to ensure remunerative prices for
farmers.
Y The Government also procures and subsidizes the sale of certain
commodities through the public distribution system.
Ä
(a) Exemption of export profit from income tax.
(b) Subsidies on cost of freight on export shipments of certain products like
fruits, vegetables and floricultural products.
?inancial Vs Commodity Õerivatives
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Exists in case of underlying commodity assets.
Method of Settlement
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Turnover of Global Commodity Exchange
Multi Commodity Exchange of India Ltd(MCX)
Y The demutualised Exchange set up by ?inancial Technologies (India) Ltd (?TIL) has
permanent recognition from the Government of India to facilitate online trading, and
clearing and settlement operations for commodity futures across the country.
Y Sixth largest and amongst the fastest growing commodity futures exchange in the
world, in terms of the number of contracts traded in 2009.
Y MCX offers . across various segments such as bullion, ferrous
and non-ferrous metals, and a number of agri-commodities on its platform.
Trading @ MCX
Y § Ä
9:45 a.m. to 9:59 a.m.
Special Session (order cancellation session) is held to cancel
the pending orders prior to opening of market .
Y | Ä
§
/
10:00 a.m. to 11:30 p.m.
(up to 11:55 p.m. on account of day light savings typically
between every November and March of the following year)
·%
/ § in respect of
futures trading in commodities and subjected to various laws of the
land.
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· To create a world class commodity exchange platform
for the market participants.
· To bring professionalism and transparency into
commodity trading.
· To inculcate best international practices like de-
modularization, technology platforms, low cost solutions
and information dissemination without noise etc. into the
trade.
· To provide nationwide reach and consistent offering.
· To bring together the entities that the market can trust
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·National Securities Clearing Corporation Limited (NSCCL) undertakes clearing of
trades executed on the NCÕEX.
·After the trading hours on the expiry date, based on the available information, the
matching for deliveries takes place firstly, on the basis of locations and then randomly.
·After completion of the matching process, clearing members are informed of the
deliverable/ receivable positions and the unmatched positions.
·nmatched positions have to be settled in cash. The cash settlement is only for the
incremental gain/ loss as determined on the basis of final settlement price.
Settlement
· §'§: On a continuous basis at the end of each day;
cash settled by debiting/ crediting the clearing accounts of
Clearing Members (CMs) with the respective clearing bank.
· / : On the last trading day of the futures contract;
the final settlement price is the spot price on the expiry day.
· The seller intending to make delivery takes the commodities to
the designated warehouse.
· Warehouse then ensures that the receipts get updated in the
depository system giving a credit in the depositor's electronic
account.
Role of regulatory bodies in Exports/Imports
Õirectorate General of ?oreign Trade (ÕG?T)
Responsible for implementing the ?oreign Trade Policy or Exim
Policy with the main objective of promoting Indian exports.
Key ?unctions -
· To Implement ?oreign trade policy of India
· coordination with state governments and all the other
departments of Ministry of Commerce and Industry
· To Grant Exporter Importer Code (EIC) Number to Indian
Exporter and Importers
· permits or regulate Transit of Goods in accordance with the
bilateral treaties between India and other countries.
Role of regulatory bodies in Exports/Imports
?orward Markets Commission (?MC)
Regulatory authority which is overseen by the Ministry of Consumer
Affairs, ?ood and Public Õistribution, Govt. of India
Key ?unctions ±
· To keep forward markets under observation and to take such action
in relation to them.
· To make recommendations generally with a view to improving the
organization and working of forward markets
· To undertake the inspection of the accounts and other documents
· to publish information regarding the trading conditions in respect
of goods
Three Tier Regulation in Commodity Markets
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Need for regulation in Commodities Markets
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Unresolved Issues
Y &
Trading in commodity options contracts
banned since 1952
Y #
Ä 1 :
Y Ä
1% to 5% of the total
commodity derivatives trade in the country are settled in
physical delivery.
Y '%
need of a strong and independent
regular, similar to SEBI.
Y * Ä
too many commodity exchanges.
Over 80 commodities . Õerivatives popular for few
commodities.
Y ' *
restrictions on the movement of
certain goods from one state to another.
Commodities and Business Cycle
Y *
Expectations of profit are at their high point and
stock prices are sky high. Banks approve loans easily. Generally
during this period, energy and metals outperform other commodities.
Y %
Uncertainties arise in the market and the market
for physical investment gets saturated and people get less profit. A
few commodities, including sugar, coffee, soybeans etc., perform
well due to their higher demand. In recession during 2008 also, it
was seen that sugar gave good returns
Y * %
Markets moves on the hope that the economy will
revive and some immediate monetary measure like interest rate cuts,
tax cuts etc. provides liquidity in the market. Some commodities,
such as maize, soybeans, sugar and gold outperform other
commodities and other investment avenues, which was seen in 2009.
Commodities and Business Cycle«Cntd
Y
In early expansion, stocks and bonds outperform
commodities. A recovery in the equity market offers support to the
commodities market. The market witnesses spontaneous
movements, optimism, and higher-than-expected profits during the
early expansion phase