The West Bengal Finance Minister’s Budget announcement of reviving the Calcutta Stock Exchange (CSE) will evoke nostalgia among many. Yet nostalgia is not a business model for reviving the moribund market-infrastructure institution. The challenge looms large: why does India need a regional stock exchange when exchanges are national, electronic, and highly concentrated?The Indian exchange landscape is completely different from the one in which regional stock exchanges flourished. Liberalisation, demutualisation, technological innovation, and regulatory reforms have fundamentally altered market structure. Trading is no longer geography-dependent. Physical trading floors have disappeared, and network effects have become overwhelmingly powerful.The consequence is a classic winner-takes-most market. The National Stock Exchange (NSE) dominates equity trading. The Multi Commodity Exchange (MCX) has become the primary platform for commodity derivatives. The Bombay Stock Exchange (BSE), despite its illustrious history, occupies a secondary position in most segments. Even newer initiatives such as the International Financial Services Centre at GIFT City have required substantial policy support and regulatory innovation to carve out space, while regional exchanges have disappeared.Who will finance revival?The biggest challenge for CSE revival is: financing. Modern exchanges operate as technology companies with highly sophisticated financial infrastructure. Matching engines, clearing and settlement systems, cybersecurity architecture, disaster recovery centres, surveillance systems, algorithmic trading interfaces, co-location facilities, and regulatory compliance frameworks require substantial upfront investment and continuous upgrades.Who will finance this modernisation? The state government itself is unlikely to be the ideal investor, given the scarcity of public resources. With uncertain returns and the nature of market concentration in the exchange industry, private investors will ask a difficult question: why invest in this venture, and what will its ROI be?The challenge is compounded by the economics of electronic markets. Liquidity attracts liquidity: without liquidity, there is no trading activity; without trading activity, there is no liquidity. Large exchanges enjoy tighter bid-ask spreads because they have more participants than smaller exchanges. Rational investors therefore gravitate toward the larger exchanges, reinforcing their dominance. Therefore, for CSE to compete directly with NSE or MCX is worse than the “David vs Goliath” analogy.Innovation alone is not enoughAdvocates of revival may argue that innovation can create a competitive advantage. The CSE could offer lower transaction fees, subsidised listings, faster onboarding, specialised co-location facilities, or customised products tailored to specific sectors. But these are insufficient. Trading costs represent only a small fraction of an investor’s overall decision-making process. The cost of a wider bid-ask spread can easily exceed the savings from reduced exchange fees.Consequently, any revival strategy would need a mechanism to artificially create liquidity in the early stages, mostly through a designated market-maker programme (in which institutions are incentivised to continuously provide buy and sell quotes). These interventions themselves involve costs, including inventory risk, price volatility, and market development. The question is who will bear these and why.A strategic entry pointThis implies CSE needs to create a strategic entry point through an asset class, market segment, or financial ecosystem that is unique and underserved. There is no point thinking of a regional financing platform in today’s electronic trading world, where reach is ubiquitous. While specialised SME financing platforms are already occupied by NSE and BSE, one possible space for the CSE is to operate for MSME clusters that can raise capital through aggregation. There are 6400 MSME clusters in India, of which around 5800 are recognised.Second, there is a possibility in climate and sustainability finance. A specialised marketplace for green bonds, adaptation bonds, blue bonds, resilience-linked securities, and sustainability-linked instruments could potentially differentiate CSE from other financial platforms. This will align naturally with Bengal’s developmental priorities and attract international development finance institutions.A third and perhaps more ambitious opportunity lies in carbon markets. India is gradually moving towards a domestic carbon market architecture. If regulatory frameworks evolve appropriately, CSE could position itself as a centre for carbon, biodiversity, and mangrove conservation credits, as well as nature-based financial instruments.A fourth possibility emerges from Bengal’s location in the Bay of Bengal. If Kolkata needs to be reconceived as the growth pole and financial gateway to BIMSTEC economies, the CSE can be reconceptualised as a specialised platform for cross-border trade finance, regional infrastructure investment vehicles, logistics-linked financing instruments, and maritime economy funds.A fifth possibility lies with the unexplored domain of municipal finance. Municipal bonds remain underdeveloped despite growing infrastructure needs. CSE can be a dedicated platform that facilitates urban infrastructure financing and attracts institutional investors into local government projects.Thinking Beyond a Conventional ExchangeFor CSE, the opportunity may therefore lie not in competing in mainstream equity trading but in becoming a platform for products that are currently underserved, as mentioned in the article. In such segments, the objective would not be to win the liquidity battle, but to create entirely new markets.Nilanjan Ghosh is Vice President -Development Studies at the Observer Research FoundationPublished on July 2, 2026