Inflation, especially the food inflation has become a major economic challenge for the public
policy in the contemporary India. Inflation pressure on food products is caused by interplay
of multiple factors. The literature has identified various sources of food price inflation that
included institutional factors, market conditions and institutional arrangements. The effect
of institutional arrangements like speculative trade in commodity on the inflation is studied
in many studies. Yet similar studies have not been attempted in the Indian context though
the speculative trade is permitted in commodities from 2003 onwards. This paper analyses
the relationship between wholesale food price index and trading on agricultural
commodities in Multi-Commodity Exchange of India (MCX) using the monthly data between
2004 and 2014 from CSO and MCX respectively. The researchers have used time series
analysis to draw conclusions from the study which indicates that there is no influence of
trading on food commodity futures on wholesale price indices. However, the trading in MCX
is influenced by fluctuations in wholesale price indices which may have implications for the
future of food commodities prices in India