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Browsing Economics - Publications by Author "Acharya, Debashis"
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    An alternative approach to monetary aggregation in DEA
    ( 2010-08-01) Sahoo, Biresh K. ; Acharya, Debashis
    This paper proposes a set of alternative DEA-based money indices that are proved to be both theoretically and empirically competing monetary aggregates since they perform as good as the Divisia aggregates. Based on all the results concerning causality, forecasting and money demand, we conclude that DEA money aggregates prove to be at least competing alternatives to the Divisia aggregates, and hence, suggest that these new aggregates may be considered along with the existing weighted monetary aggregates like the Divisia ones. Given the inherent benefit of the doubt weighting mechanism underlying the DEA models where the optimal weight assigned by DEA to each monetary asset reflects the ongoing financial innovation and the Reserve Bank of India's policy priority in the distribution of total liquidity, we feel that the DEA money indices can truly capture the liquidity better with ongoing financial innovations in the economy. © 2009 Elsevier B.V. All rights reserved.
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    Can a Disinflationary Policy Have a Differential Impact on Sectoral Output? A Look at Sacrifice Ratios in OECD and Non-OECD Countries
    ( 2018-05-01) Sethi, Dinabandhu ; Wong, Wing Keung ; Acharya, Debashis
    This article examines the sectoral impact of disinflationary monetary policy by calculating the sacrifice ratios for several Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. Sacrifice ratios calculated through the episode method reveal that disinflationary monetary policy has a differential impact across three sectors in both OECD and non-OECD countries. Of the three sectors, the industry and service sectors show significant output loss due to a tight monetary policy in OECD and non-OECD countries. But the agricultural sector shows a differential impact of disinflation policy: It shows a negative sacrifice ratio in OECD countries indicating that output growth is insignificantly affected by a tight monetary policy while non-OECD countries yield positive sacrifice ratios, suggesting that the output loss is significant. Further, it is observed that sacrifice ratios calculated from aggregate data are different from ratios calculated from sectoral data. JEL Classification: E52, E58, C14, O50.
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    Commodity Prices and Domestic Inflation in India
    ( 2011-05-01) Joshi, Ajit R. ; Acharya, Debashis
    In this article, the relationship between international prices of primary commodities and domestic inflation in India has been explored empirically for the period 1994 to 2007. For this purpose a commodity price index with international price quotations and domestic WPI weights has been constructed. The empirical results show that cointegration between international and domestic prices has grown stronger in the period since 2000. The co-movement is found at both aggregate indices as also the sub-groups viz. fuel and manufactured products. While carrying out this analysis, it was found that it is necessary to use an appropriate index, in order to capture the country-specific exposure, rather than using the aggregate indices published by international agencies, whose coverage and weights may not represent the risks and exposures of specific countries.
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    Constructing macroeconomic performance index of Indian states using DEA
    ( 2012-01-01) Sahoo, Biresh K. ; Acharya, Debashis
    Purpose: The purpose of this paper is to construct a robust macroeconomic performance (MEP) index of the State economies of an emerging market economy, i.e. India. Design/methodology/approach: Two variants of data envelopment analysis (DEA) models - radial and non-radial - are proposed to construct the macroeconomic policy performance of 22 Indian State economies in the post-economic reforms era covering the period: 1994-1995 to 2001-2002, using three macroeconomic indicators: growth in gross state domestic product, price stability, and fiscal deficit. Findings: The authors' three broad empirical findings are: first, the radial and non-radial DEA models yield significantly different rankings of State economies in terms of their MEP index scores; second, as against the use of only growth in gross state domestic product and price stability for MEP measure, the inclusion of fiscal deficit as an additional indicator yields a noticeable improvement not only in the State MEP index scores, but also in their rankings, thus providing the evidence of relatively successful attempt by the Indian States in reducing fiscal deficit, in general, and legislating FRBM bill, in particular; and third, a positive significant correlation between foreign direct investment (FDI) and MEP indicates that a State's overall macroeconomic policy performance does matter to attract FDI. Research limitations/implications: Since the DEA models employed in this study ignore the possibility of asymmetric shocks, the MEP results might be questioned in this deterministic setting. However, the study period has been smooth and has not been subject to any major changes in the State economic policies. Therefore, the MEP results might not be susceptible such changes. However, further research is desired on examining the macroeconomic policy performance behavior of Indian States using bootstrapping DEA. Originality/value: None of the past Indian studies were able to give a comprehensive picture concerning the MEP behavior of Indian State economies, since the methodologies adopted in those studies were not suitable to take into consideration all the macro indicators at a time. Therefore, this present study is considered the first of its kind in assessing the MEP index of the Indian State economies by simultaneously considering all the macro indicators. © Emerald Group Publishing Limited.
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    Corporate Performance during Business Cycles: Evidence from Indian Manufacturing Firms
    ( 2018-10-01) Lagesh, M. A. ; Srikanth, Maram ; Acharya, Debashis
    The present study is an attempt to assess the ‘probability of incurring loss’ of manufacturing firms in India during different phases of business cycles. We use data on a sample of 87 manufacturing companies for the period from 2002 to 2014 (comprising 1131 firm years). We use the panel logit model with the dependent variable derived from the return on assets to empirically test the hypothesis. Besides, we use firm-specific variables and macroeconomic variables as independent variables in the model. Firm-specific variables, namely size of the firm and interest coverage ratio and macroeconomic variables namely exchange rate, bank credit, inflation, interest rate and index of industrial production are statistically significant in predicting the probability of incurring loss of the firms during the study period. The results are important for investors, corporate houses, managers, lenders, policymakers and the research community as business cycles have a visible impact on all functional areas of an organization. Our study assumes significance because of the importance of macroeconomic variables in the strategic decision-making of the corporate sector in general and manufacturing firms in particular.
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    Credibility of inflation targeting: some recent Asian evidence
    ( 2019-08-01) Sethi, Dinabandhu ; Acharya, Debashis
    Inflation targeting (IT) has been popular in emerging economies despite its early adoption in advanced countries. This paper seeks to find out whether the presence of the IT regime for the Asian countries enhance credibility of the central banks. The study makes use of two episode methods in the calculation of sacrifice ratio for the period 1970–2014 for 13 Asian economies. Empirical findings based on annual data suggest that an IT regime indeed enhances credibility of the central banks. The low sacrifice ratio in IT countries is explained by the implementation of IT regime. The IT policy has potential to reduce sacrifice ratios by 3.7–5.7 points. Among other determinants initial inflation is found to be significant in Asian economies. However, the speed of disinflation remains insignificant irrespective of the method used in the analysis. These findings do not support the idea that IT and speed can be used alternatively as credible monetary policy.
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    Dynamic linkages between foreign direct investment and domestic investment: Evidence from emerging market economies
    ( 2014-01-01) Jain, Vipul ; Gopalaswamy, Arun Kumar ; Acharya, Debashis
    This paper examines the long-run relationship between FDI inflows, FDI outflows and gross fixed capital formation, in a dynamic panel of 22 Asian, Latin American and other emerging market economies. Employing panel cointegration and causality tests, we find a mixed picture of these relationships across the three sub-samples. It is observed that a positive and significant long-run relationship exists between FDI inflows and fixed capital formation for Asian EMEs, suggesting a crowd-in effect. This finding is consistent with the complementary hypothesis of neoclassical macroeconomic growth model in which it is often thought that FDI inflows complement the domestic investment. The results for the relationship between FDI outflows and fixed capital formation indicate a significant negative long-run relationship for Asian and other EMEs. In addition, the long-run causality is observed to be bidirectional for both the samples. These results confirm the general, accepted view that FDI outflows reduce domestic investment.
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    Dynamic risk-return relation with human capital: A study on Indian markets
    ( 2012-04-06) Shijin, Santhakumar ; Gopalaswamy, Arun Kumar ; Acharya, Debashis
    The purpose of this paper is to test a discrete time asset pricing model where a non-marketable asset (human capital), along with other factors predicting stock returns, explain risk return relationship. The paper will add to the literature on risk return relationship with human capital by investigating the hypothesis that human capital is a significant factor affecting stock prices. The dynamic inter-linkages of factors representing financial and human components of wealth in predicting stock returns is tested in the Indian market for the period of 1996:04 to 2005:06. The procedures employed include Granger causality tests, impulse response functions and seemingly unrelated regression estimates. Empirical findings validate the model that including human capital as a proxy for aggregate wealth in the economy can better predict stock prices than the standard empirical capital asset pricing model. There is a Granger cause relationship between security prices and labor income and it is further concluded that labor and dividend are significant factors affecting security prices. This is one of the first papers to study the human capital aspect in predicting stock returns in the Indian market. In addition, the paper provides important insights into the causal relationship of human capital and market return in explaining the risk return relationship. © 2012, Emerald Group Publishing Limited
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    Estimating Sectoral Disinflation Cost in India: Some Structural VAR Evidence
    ( 2018-12-01) Sethi, Dinabandhu ; Acharya, Debashis
    This paper attempts a sectoral estimation of sacrifice ratios for India. Two Structural VAR models are estimated using quarterly data for the period 1997–98 Q1 to 2016–17 Q1. The empirical findings suggest that the real cost of disinflation policy is not negligible in India. The estimate of sacrifice ratios in terms of real GDP range from 0.16 to 0.17 depending upon the model employed. The calculation of sectoral sacrifice ratios show that all the three sectors are affected negatively and the largest impact is found in the manufacturing sector followed by the other two sectors, i.e., agriculture sector and service sector. The sacrifice ratio in the manufacturing sector is found to be 1.10 and 0.72 indicating huge negative impact of tight monetary policy. Similarly, for the agriculture sector the sacrifice ratios are 0.40 and the service sector shows sacrifice ratios of 0.36 and 0.37 respectively for different models. Further, from 10-year rolling estimation, we find that sacrifice ratios are time varying. The sacrifice ratio is declining in the last few quarters at the aggregate and sectoral levels indicating that disinflation could be less costly in recent times. However, the high disinflation cost experienced prior to the year 2015 can’t be neglected. So, it is important to take caution while interpreting the results of disinflation cost in India.
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    Evidence from a new currency equivalent monetary aggregate for India
    ( 2007-01-01) Acharya, Debashis ; Gopalaswamy, Arun Kumar
    This paper empirically examines the properties of a new weighted monetary aggregate, Currency equivalent monetary aggregate (CEMA) for India using the components of a broad monetary aggregate NM3 recommended by the working group on Money Supply, Analytics and Methodology of Compilation, Reserve Bank of India (RBI, 1998). The empirical properties of this aggregate via a money demand function are compared with its simple sum counterpart NM3. The results suggest the superiority of the CEMA over NM3.
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    Examining the differential impact of monetary policy in India: a policy simulation approach
    ( 2020-12-30) Bhat, Sajad Ahmad ; Kamaiah, Bandi ; Acharya, Debashis
    Purpose: Though an accumulating body of study has analysed monetary policy transmission in India, there are few studies examining the differential impact of monetary policy action. Against this backdrop, this study aims to analyse the differential impact of monetary policy on aggregate demand, aggregate supply and their components along with the general price level in India. Design/methodology/approach: The study develops a structural macroeconometric model, which is primarily aggregate and eclectic in nature. The generalized method of movements is used for estimation of behavioural equations, while a Gauss–Seidel algorithm is used for model simulation purposes. Findings: The paper presents the results of two policy simulations from the estimated model that highlight the differential impact of monetary policy. The first one, hike in the policy rate by 5% and second is a reduction in bank credit to the commercial sector by 10%. The results from the first policy simulation experiment reveal that interest hike has a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is borne by investment demand and imports followed by private consumption. While as among the components of aggregate supply maximum impact is born by infrastructure output followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. The results from the second policy simulation experiment revealed that pure monetary shocks have a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is born by private consumption and imports followed by investment demand. While as among components of aggregate supply maximum impact is borne by infrastructure followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. From both policy simulation experiments, the study highlighted the relative importance of the income absorption approach as opposed to the expenditure switching effect. Practical implications: The results obtained in this study provides a strong framework for design the monetary policy framework. The results are in a view of the differential impact of monetary policy action among the components of both aggregate demand and aggregate supply. This reflection of differential impact has immense significance for the macroeconomic stabilization as the central bank will have to weigh the varying repercussion of its actions on different sectors. For instance, the decline in output after monetary tightening might be conceived as mild from an overall perspective, but it can be appreciable for some sectors. This differential influence will have an implication for policy design to care for distributional aspects, which otherwise could be neglected/disregarded. Similarly, the output decline may be as a result of either consumption postponement or a temporary slowdown in investment. However, the one emanating due to investment decline will have lasting growth implications compared to a decline in consumer demand. In addition, the relative strength of expenditure changing or expenditure switching policies of trade balance stabilization may have varying consequences in the aftermath of monetary policy shock. Accordingly information on the relative sensitiveness/insensitiveness of different sectors/ components of aggregate demand towards monetary policy actions furnish valuable insights to monetary authorities in framing appropriate policy. Originality/value: The work carried out in the present paper is motivated by the fact that although a number of studies have examined the monetary transmission mechanism in India, a very few studies examining the differential impact of monetary policy action. However, to the best of the knowledge, there is no such studies, which have examined the differential impact of monetary policy in the structural macro-econometric framework. The paper will enrich the existing literature by providing a detailed account of the differential impact of monetary policy among the components of both aggregate demand and aggregate supply in response to an interest rate hike, as well as a decrease in the money supply.
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    Examining the differential impact of monetary policy in India: a policy simulation approach
    ( 2020-12-30) Bhat, Sajad Ahmad ; Kamaiah, Bandi ; Acharya, Debashis
    Purpose: Though an accumulating body of study has analysed monetary policy transmission in India, there are few studies examining the differential impact of monetary policy action. Against this backdrop, this study aims to analyse the differential impact of monetary policy on aggregate demand, aggregate supply and their components along with the general price level in India. Design/methodology/approach: The study develops a structural macroeconometric model, which is primarily aggregate and eclectic in nature. The generalized method of movements is used for estimation of behavioural equations, while a Gauss–Seidel algorithm is used for model simulation purposes. Findings: The paper presents the results of two policy simulations from the estimated model that highlight the differential impact of monetary policy. The first one, hike in the policy rate by 5% and second is a reduction in bank credit to the commercial sector by 10%. The results from the first policy simulation experiment reveal that interest hike has a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is borne by investment demand and imports followed by private consumption. While as among the components of aggregate supply maximum impact is born by infrastructure output followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. The results from the second policy simulation experiment revealed that pure monetary shocks have a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is born by private consumption and imports followed by investment demand. While as among components of aggregate supply maximum impact is borne by infrastructure followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. From both policy simulation experiments, the study highlighted the relative importance of the income absorption approach as opposed to the expenditure switching effect. Practical implications: The results obtained in this study provides a strong framework for design the monetary policy framework. The results are in a view of the differential impact of monetary policy action among the components of both aggregate demand and aggregate supply. This reflection of differential impact has immense significance for the macroeconomic stabilization as the central bank will have to weigh the varying repercussion of its actions on different sectors. For instance, the decline in output after monetary tightening might be conceived as mild from an overall perspective, but it can be appreciable for some sectors. This differential influence will have an implication for policy design to care for distributional aspects, which otherwise could be neglected/disregarded. Similarly, the output decline may be as a result of either consumption postponement or a temporary slowdown in investment. However, the one emanating due to investment decline will have lasting growth implications compared to a decline in consumer demand. In addition, the relative strength of expenditure changing or expenditure switching policies of trade balance stabilization may have varying consequences in the aftermath of monetary policy shock. Accordingly information on the relative sensitiveness/insensitiveness of different sectors/ components of aggregate demand towards monetary policy actions furnish valuable insights to monetary authorities in framing appropriate policy. Originality/value: The work carried out in the present paper is motivated by the fact that although a number of studies have examined the monetary transmission mechanism in India, a very few studies examining the differential impact of monetary policy action. However, to the best of the knowledge, there is no such studies, which have examined the differential impact of monetary policy in the structural macro-econometric framework. The paper will enrich the existing literature by providing a detailed account of the differential impact of monetary policy among the components of both aggregate demand and aggregate supply in response to an interest rate hike, as well as a decrease in the money supply.
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    Financial development and economic growth in Indian states: An examination
    ( 2009-02-01) Acharya, Debashis ; Amanulla, S. ; Joy, Sara
    This paper aims to investigate the relationship between financial development and economic growth (FE) in the Indian states. In pursuit of this objective, the tests of Panel Cointegration and Fully Modified Ordinary Least Squares (FMOLS) are conducted by using three panel data sets viz., (i) data on BIMAARU states, (consisting of five states); (ii) data on nine other Indian States and (iii) data on full sample of fourteen states (BIMAARU states as well as nine other Indian states). The data used in this study consists of the annual data on Net State Domestic Product and Total Commercial Bank Credit Outstanding in various sectors during period 1981-2002, collected from various publications of Reserve Bank of India and Central Statistical Organisation. The panel cointegration results confirm a long-run relationship between financial development and growth across Indian states. © EuroJournals Publishing, Inc. 2009.
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    Financial inclusion across major Indian states: some spatial panel econometric evidence
    ( 2021-02-08) Erra, Kamal Sai Sadharma ; Acharya, Debashis
    Purpose: This paper aims to test for spatial convergence in financial inclusion across major Indian states and union territories. Design/methodology/approach: After initially building an Index of Financial Inclusion (IFI) for major Indian states between 2003 and 2016, exploratory spatial data analysis (ESDA) is employed to draw inferences about mean and variance of IFI. The paper then seeks to confirm the ESDA results through spatial panel regression techniques. Finally, spatial results are correlated with results from aspatial convergence measures. Findings: The study finds that there is no evidence of spatial convergence in financial inclusion over the study period, suggesting that those states that were relatively less financially included remained so through the study period. The study also asserts the relevance of certain important determinants, namely, per capita income, infrastructure, industrialization and gender. Research limitations/implications: This study has two limitations. First, only banking institutions are considered in measuring financial inclusion. Second, due to lack of a consistent indicator of gender participation across states, we had to employ sex ratio as a proxy. Practical implications: The study suggests that policies to expand financial inclusion in Indian states, especially those with low inclusion levels are likely to benefit neighbouring states also, thereby accelerating the financial inclusion drive across states. Originality/value: The study is a first in the Indian context to estimate the spatial dependence of financial inclusion and provides relevant implications for policymakers and bankers to target financial inclusion schemes in backward states.
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    Financial inclusion and economic growth linkage: some cross country evidence
    ( 2018-08-22) Sethi, Dinabandhu ; Acharya, Debashis
    Purpose: The purpose of this paper is to assess the dynamic impact of financial inclusion on economic growth for a large number of developed and developing countries. Design/methodology/approach: This study uses some panel data models such as country-fixed effect, random effect and time fixed effect regressions, panel cointegration, and panel causality tests to examine the linkage between financial inclusion and economic growth. Panel cointegration is being used to test the long run association between financial inclusion and economic growth, whereas panel causality test is used to find the direction of causality between financial inclusion and economic growth. The data on financial inclusion are taken from Sarma (2012) for the period 2004-2010. Findings: The empirical findings reveal that there is a positive and long run relationship between financial inclusion and economic growth across 31 countries in the world. Further, panel causality test shows a bi-directional causality between financial inclusion and economic growth Thus, the study confirms that financial inclusion is one of the main drivers of economic growth. Research limitations/implications: This study has two limitations. First, this study considers only banking institutions in the analysis. Second, the period tested for the long run relationship is not long enough. Practical implications: This study empirically measures the quantitative impact of financial inclusion policies pursued across the world. The study also suggests that policies emphasizing financial sector reforms in general and promoting financial inclusion in particular shall result in higher economic growth in the long run. Originality/value: This study attempts to assess the long run relationship between financial inclusion and economic growth with the help of a multidimensional index of financial inclusion. Therefore, this can be a valuable contribution to the banks and policymakers.
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    Inflation model for india in the context of open economy
    ( 2011-03-01) Joshi, Ajit R. ; Acharya, Debashis
    In this article, an atheoretic model is built to explain and forecast inflation, using variables that capture domestic as well as foreign influences on inflation. In all, five specifications of models are estimated, one with only domestic variables and four with one of the foreign price variables, namely, Commodity Price Index (COMM), US Producer Price Index (USPPI), crude oil price (CRUDE), industrial countries' Consumer Price Index (CPI) (INDCPI). It is found that models with foreign price indicators provide better in-sample fit than the baseline model with only domestic variables. Among the models with foreign price variables, the Commodity Price Index (COMM) performs as the best foreign price variable among the set used, in terms of both in-sample and out-of-sample root mean squared errors (RMSE). © 2011 Research and Information System for Developing Countries & Institute of Policy Studies of Sri Lanka.
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    Is bitcoin a near stock? Linear and non-linear causal evidence from a price–volume relationship
    ( 2019-07-31) Sahoo, Pradipta Kumar ; Sethi, Dinabandhu ; Acharya, Debashis
    Purpose: The purpose of this paper is to examine the price–volume relationship in the bitcoin market to validate near-stock properties of bitcoin. Design/methodology/approach: Daily data of bitcoin returns, returns volatility and trading volume (TV) are utilized for the period August 17, 2010–April 16, 2017. Linear and non-linear causality tests are employed to examine price–volume relationship in the bitcoin market. Findings: The linear causality analysis indicates that the bitcoin TV cannot be used to predict return; however, the reverse causality is significant. In contrast, the non-linear causality analysis shows that there are non-linear feedbacks between the bitcoin TV and returns. The bitcoin TV, which represents new information, leads to price changes, and large positive price changes lead to increased trading activity. Similarly, in recent periods (post-break period), the results of the non-linear causality test show a unidirectional causality from TV to the volatility of returns. Research limitations/implications: This study uses the average index value of major bitcoin exchanges. But further research on this relationship using data from different bitcoin exchanges may provide further insights into the price–volume relationship of bitcoin and its near-stock properties. Practical implications: These findings from the non-linear causality analysis, therefore, suggest that investors cannot simply base their decisions on the linear dynamics of the bitcoin market. This is because new information in terms of the TV is neither linearly related to the price nor it is a one-to-one kind of relationship as most investors commonly understand it to be. Rather, investors’ decisions should be based on non-linear models, in general, and the best-fitting non-linear model, in particular. Originality/value: The study examines bitcoin’s near-stock properties in a price–volume relationship framework with the help of both linear and non-linear causality tests, which to the best of the authors’ knowledge remains unexplored.
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    Monetary Policy and Financial Stability: The Role of Inflation Targeting
    ( 2020-03-01) Sethi, Dinabandhu ; Acharya, Debashis
    This article examines the relationship between Inflation targeting (IT) and financial instability from 1990 to 2015 for Asian economies. To measure financial instability, a multidimensional financial conditioning index is calculated following the ECB's approach. Using a fixed effects panel data model the study finds that adoption of IT policy in Asian economies has an adverse impact on financial stability, thus rejecting the ‘conventional wisdom’ hypothesis. Further, the Vector Autoregression (VAR) result shows that an IT regime increases housing returns and encourages investors to take higher risks.
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    Perverse liquidity effect of monetary policy: Some evidence for India
    ( 2014-02-27) Subrahmanyam, Ganti ; Telidevara, Sridhar ; Acharya, Debashis
    The liquidity effect of money supply increases, as policy-oriented measures, would generally lead to a decline in interest rates. This is the direct effect. However, such money supply increases lead to a sum of the direct effect plus the positive indirect price and income effects. In sum, the net effect may be positive leading to a net increase and not a decrease in the interest rate. The regular money demand function is suitably modified to capture the structural changes of the Indian economy to verify the net effect of monetary policy-induced money supply movements. The empirical evidence indicates the presence of a perverse liquidity effect. © 2013 Taylor & Francis.
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    Price discovery and volatility spillovers in futures and spot commodity markets : Some Indian evidence
    ( 2014-07-29) Kumar Mahalik, Mantu ; Acharya, Debashis ; Suresh Babu, M.
    Purpose – The purpose of this paper is to investigate empirically the price discovery and volatility spillovers in Indian spot-futures commodity markets. Design/methodology/approach – The study has used four futures and spot indices of Multi-Commodity Exchange, Mumbai. The study also employs vector error correction model (VECM) and bivariate exponential Garch model (EGARCH) to analyze the price discovery and volatility spillovers in Indian spot-futures commodity market. Findings – The VECM shows that agriculture future price index (LAGRIFP), energy future price index (LENERGYFP) and aggregate commodity index (LCOMDEXFP) effectively serve the price discovery function in the spot market implying that there is a flow of information from future to spot commodity markets but the reverse causality does not exist. There is no cointegrating relationship between metal future price index (LMETALFP) and metal spot price index (LMETALSP). Besides the bivariate EGARCH model indicates that although the innovations in one market can predict the volatility in another market, the volatility spillovers from future to the spot market are dominant in the case of LENERGY and LCOMDEX index while LAGRISP acts as a source of volatility toward the agri-futures market. Research limitations/implications – The results are aggregate in nature. Further study at disaggregated level will provide further insights on behavior of specific commodity prices and the price discovery process. Originality/value – The paper provides useful information about the evolution and structures of futures commodity trading in India, related literature and relevant methodology concerning the hypotheses.