Balancing act: the economic toll of India’s 2021 suspension of agricultural futures trading

Purpose The study investigates the unintended consequences of India’s regulatory decision to suspend agricultural commodity derivatives, namely the futures contracts, in an effort to curb food inflation. It explores the impact of the intervention on smallholder farmers, value chain participants (VCPs) and traders, focussing on market access, risk management and financial stability in key oilseed-producing states. Design/methodology/approach This qualitative case study examines the impacts of the 2021 suspension of agricultural futures contracts by conducting interviews with farmer-producer companies (FPCs), traders and VCPs in Rajasthan and Madhya Pradesh, with an emphasis on soybean and mustard production. The analysis integrates primary insights with secondary market data to assess the economic impacts of the policy. Findings The suspension implemented to manage inflation, however, had several unintended consequences, including disruption of market coordination, a reduction in farmers’ bargaining power and heightening uncertainty, all of which ultimately impacted incomes. Additionally, the absence of formal hedging options increased the vulnerabilities faced by small traders and farmers. Research limitations/implications The study is geographically focused on two states and uses a qualitative approach, which may limit the generalisability of findings. However, the deep insights offer strong implications for similar contexts. Further research could quantify the long-term economic impacts across a broader geographic base and commodity range. Social implications The policy has intensified rural economic stress by diminishing farmer incomes and amplifying financial risks, particularly for marginalised stakeholders. This underscores the need for inclusive policy frameworks that support rural resilience through accessible, transparent and functioning markets. Originality/value This study is among the first empirical studies to capture on-ground impacts of the 2021 suspension of agri-commodity derivatives in India across the agri value chain. It draws on institutional economics and examines the effects of regulatory intervention to connect policy objectives with field realities, offering nuanced insights into how restrictive financial regulations can unintentionally weaken market resilience and rural livelihoods.