Sri Lanka's inflation can be incorporated into a futures derivative, according to a derivatives consultant. "There is some good work to be done on inflation. A futures contract on inflation is something to think about," Ajay Shah, Consultant to the Securities and Exchange Commission (SEC) on the derivatives initiative, told The Sunday Times FT.
He said Sri Lanka can establish an inflation related index where firms can hedge their inflationary positions. He also said that Sri Lanka can manufacture derivative products in the country and sell them abroad. "Sri Lanka can come up with a tea futures market. You can trade in tea futures contracts targeting Indian, British and Kenyan markets," he said.
Similarly he said a rubber futures is an option. "Rubber futures is banned in India. This is an ideal opportunity," he added. Mr. Shah pointed out that a freight futures contract should also be looked at. "The Colombo Port is well plugged into logistics movements. So a freight futures contract targeting Dubai, Singapore and Bombay is a lucrative option," he explained. He also pointed out that Sri Lanka can capitalise on Indian state controls on capital markets.
"Indian state/public policy is stopping some financial markets. So Sri Lanka can capitalise on this, but the key is to get the product out to the correct customers," he said.