NCDEX, CAI join hands to boost India’s cotton derivatives market

NCDEX and the Cotton Association of India (CAI) have entered into a five-year partnership to increase participation in cotton derivatives and strengthen price discovery and risk management for the country's cotton industry.

India accounts for around 20-23% of global cotton production and about 38% of the world's cotton-growing area. Despite this, Indian physical markets remain fragmented and participation in cotton derivatives has been relatively low, limiting the country's influence over global cotton price discovery.

Under the agreement, NCDEX and CAI will work with participants across the cotton value chain to increase awareness and adoption of futures contracts, particularly among ginners, spinners and exporters.


The two organisations will also focus on reducing the gap between physical cotton prices and futures markets, with Maharashtra and Gujarat expected to be key focus markets, along with Punjab, Andhra Pradesh and Telangana.

The partnership comes as NCDEX seeks to expand its cotton derivatives business. Its existing Cotton Complex includes contracts for Kapas, Cottonseed Oil Cake and Cotton Wash Oil.

“Cotton is central to India's agricultural economy, yet our derivatives market has never fully reflected the country's scale of production,” said Vikas Goel, managing director and chief executive officer, NCDEX.
He said the partnership would focus on developing the cotton derivatives market and providing participants across the value chain with tools to manage price risk.

Vinay Kotak, president of CAI, said the cotton industry has struggled to develop a hedging culture because of low awareness and products that were not aligned with global standards.

The agreement was signed by Goel and Kotak in Mumbai on Wednesday in the presence of Lalit Kumar Gupta, chairman and managing director of the Cotton Corporation of India (CCI), and senior representatives of both organisations.

CCI, a central public sector undertaking under the Ministry of Textiles, is involved in cotton procurement, trade and exports.

NCDEX and CAI will jointly conduct stakeholder engagement and education programmes aimed at farmers, ginners, spinners, exporters and other participants, with the objective of increasing the use of cotton futures for price-risk management.

For India, the broader challenge is to translate its large production base into greater influence in cotton price discovery, an area where global benchmarks have historically played a bigger role.