Allowing futures trading in commodities will not fuel inflation, government's chief economic advisor Kaushik Basu said on Friday, reports PTI.

"The reason why I am personally in favour of allowing futures trade in commodities is because it is not going to make inflation worse," Mr Basu said at a FICCI seminar on de-risking futures trading in commodities.

He said that futures trading is an efficient way of price discovery and extremely important for many stakeholders to take a position against price risk.

However, he said that it should not be left unregulated as there are possibilities of people getting cheated.

"To have a regulation, the first thing is to say that it (futures trade) is a legitimate activity," Mr Basu said.

Further, to mitigate the impact of high food inflation, which is hovering at 17%-18%, on the common man, Mr Basu said that the government's storage and release mechanism of food grains needs to be improved.

"We need to give much more thought on foodgrains management to protect the most vulnerable section of the population. I think this mechanism can be improved by bringing in the private sector into play and we need to tweak our food grains release mechanism system to do it better," he said.

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