September 2020, South Asia
Commodities are nature-produced items rather than manufactured ones; they are most often used as inputs in the production of other goods or services.
Currently, there are about 50 major commodity markets worldwide that facilitate the trade of approximately 100 primary commodities. It is split mainly into two major parts: hard and soft commodities. Soft commodities include mainly wheat, soybean, fruits, rice, coffee, livestock etc whereas hard commodities include gold, silver, rubber, copper, zinc, oil and more.
A commodity market is a digital platform for buying, selling and trading primary goods in physical or virtual markets. It is not focused on making benefits and losses, or fixing the price, but it also provides an open platform for a free play-based supply and demand. In the context of Nepal, the commodity market is very young, volatile in which impatient trader lose a lot.
Few companies like Nepal Mercantile Exchange, Commodity Future Exchange, Multi-Derivative Exchange Nepal, National Commodity Exchange and Nepal Derivative Exchange had applied to run the commodity exchange, but the Security Board of Nepal (SEBON) has not approved the licence till date. SEBON has permitted commodity traders to invest in six types of goods such as agricultural products, metals, precious metals, mineral oils, edible oils and others. The agricultural products include 23 goods like cotton, chilli, cashew nut, sugarcane, cardamom, potato, paddy, ginger, fruit and fruit juices.
Nepal is a small country with a small economy, so any changes in any economic sector will impact our economy. As we see clearly today, the service sector is the most important sector of our economy, which is just over 50% of the economy. In this sector, banking and financial institutions play a vital role in dominating the real sectors like agriculture and industry. Furthermore, Nepal’s economy is based on remittance that was equal to about 25.42% of the GDP in the fiscal year 2018/19 when agriculture contributed about 27%, and industry 13.5% to the national gross domestic product (GDP). Moreover, Nepal imports oil products in a huge quantity along with massive food products and has experienced a major trade deficit with neighbouring India. The economic growth rate is badly hit by the Covid-19 pandemic now. It is feared that the rate could be restricted to around 2% this year.
