Commodity Futures Market Efficiency in India and Effect on Inflation

The paper aims to study the commodity futures market efficiency in India and analyzing its effect on social welfare and inflation in the economy. The wheat futures market at National Commodity & Derivatives Exchange Ltd. (NCDEX) has been studied and efficiency has been estimated through Johansen's Cointegration approach for different futures forecasting horizons ranging from one week to three months. The commodity futures market is not efficient even in the short run. The social loss statistic also indicates poor price discovery. The growth in commodity futures markets volumes also has a significant impact on the inflation in the economy.