Can India, the world's biggest consumer of gold, have an independent gold exchange?

Shaktikanta Das, secretary of Department of Economic Affairs, who mooted the idea, has asked bullion dealers and jewellers to give it a thought and send a concrete proposal to the government.

"This is my personal thought. But can we think of a gold exchange where there can be transparent trading. Those who have surplus gold can sell it to those who require it. There is a jeweller who needs gold temporarily so instead of importing it, he can purchase locally'" said Das.

If at all this happens, it will channelise the thousands of tonnes of gold lying in the domestic market and give easy access to yellow metal and for bullion dealers and jewellers alike.

The Multi Commodity Exchange (MCX), which records the highest trading in gold with a 98% market share, however, feels any such move would fragment the market.

In a response to an e-mail query, an MCX spokesperson said, "We don't want to comment on the secretary's view. Probably he may be talking with reference to trading in gold as spot like an e-platform for physical spot deliveries. All the value chain participants in the gold ecosystem have been using the MCX platform to manage their price risk effectively for the last several years."

"Many large corporate houses, importers, exporters and large jewellers have started shifting part of their hedging requirement to COMEX (a part of CME Group), thereby affecting liquidity and volumes at MCX. As a result, India has lost the opportunity to become a price-setter in gold," said MCX.

But many experts believe independent gold exchange was need of the hour.

Mohit Kamboj, president of the Indian Bullion and Jewellers Association (IBJA), said the association is all set to launch a gold exchange in next six months.

"We are in discussion with the regulators and the participants, if things works out, then we will have our own exchange in next six months," said Kamboj.

Ajay Kedia of Kedia Commodities, said, "It should have been done earlier because the participants are facing a lot of hindrances in the physical gold market. This will bring in more stability in terms of premiums and pricing of gold."

The secretary also expressed concerns over gold prices and its forward trading.

"There are concerns whether it would have inflationary impact on gold prices. But gold prices are internationally determined. Hence, I don't think local trading will significantly alter global prices. This is one concern which needs to be addressed," he said.

Meanwhile, the government is also reviewing the recently launched gold monetisation and bond schemes.

According to Das, the recently launched gold bond scheme was a "huge success" as it received applications from 63,000 investors and subscription for 917 kg of the yellow metal worth Rs 246 crore in its first tranche between November 5 and 20.

J K Dadoo, additional secretary with the commerce ministry, suggested that the government should send its officials to temples and persuade them to participate in the gold monetissation scheme. In fact, about 22,000 tonne of gold worth $1 trillion is lying in India, of which 90% is with temples and religious institutions. "Thus the markets will be flooded with gold with around 1,000 tonne of outflow from trusts," said Dadoo.