Gold policy in modern India
Who is responsible for Mumbai Bomb blasts?
Dawood Ibrahim? Wrong!
Tiger Memon? Wrong?
The answer is Late Morarjee Desai – India’s ex-Prime Minister and Finance Minister.
And a whole lot of RBI and GOI officials who were behind 40 years of legislation which has created India’s underworld, corrupted 4 generations of India Government officials and reduced the value of Indian savings by Rs.1,20,000 crores. (4000 tons of gold purchased by Indian consumers at a 30% premium at today’s value – do your numbers).
The Indian development idiom is an imported idea. For instance, the Five Year Plans, from Russia. Indian monetary authorities have been led by western discourse and strategy.
No enabling mechanism, (an output of differential thinking) like the Japanese business led by MITI, American business supported by Marshall Plan, NATO, CENTO, SEATO, IMF, World Bank, US Exim Bank, ADB et al. It is these mechanisms that enabled these economies retain their dominant and exploitative positions.
India’s Gold Policy was also a case of warped thinking. To be fair, domestic thinking had to contend a tectonic shift – from a colonial-feudal system to a nationalist, democratic economy. Not discounting, Western pressures tied to aid. For instance, India’s infamous population control policy.
The other big disadvantage – English language.
The French Lesson
India’s red herring of English language stopped it following French strategy, an empire under eclipse before WW2. Today, 60 years later, France has come ahead of its arch rival and competitor – Britain. Of course, the French strategy is simple – nationalize the economy, with token private sector presence.
In the 1960s, most of the world was buying gold at an artificially low price of US$35 – and the USA was bleeding gold. The French team of Charles de Gaulle and his economic advisor, Jacques Rueff did quick maths. It was clear this मेला would not last long. The USA was printing dollars and dumping it in world markets.
The French redeemed their dollar holdings, sent the French navy to take delivery of gold from USA and bring it to Banque de France. The French raised gold reserves and dumped dollars. Banque De France finally increased its gold reserve to 92% (as a percentage of total foreign currency /monetary reserves).
The Bretton Woods system.
The world after WW2, has been governed by a financial system that has been a failure. The Bretton Woods Agreement, a millstone around the developing world. As WW2 came to a close, British-American economists came together and devised this system. The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.
It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Did anyone notice how much Britain resisted, joined and finally exited the European Currency Union. Thie Bretton Woods System has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of depreciating currencies.
It also gave rise to the Bretton Woods twins (the IMF and the World Bank), which are run and managed by the Anglo-Saxon countries. The ABC countries (and their client states like Japan, etc.) have more than 67% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.
Indian Government supported the Bretton Woods sham
The Bretton Woods system worked for 20 years because Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnsonn’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967. His break with Indira Gandhi began when the Finance portfolio was taken away from him.
Morarji Desai’s ban on gold imports allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more. Was it a co-incidence that many of the RBI functionaries later got plum postings at LSE (IG Patel) and IMF (BN Aadarkar-IMF)?
March 15th, 1968. Finally, US support for gold prices stopped at consumer level. USA continued to promise redemption to Governments at US$35 per ounce. And on August 15th, 1971, the world got the Nixon Chop. By that time, USA gold reserves had dropped from 20,000 tons to 8500 tons – from 21,828 tons (701.8m troy ounces) in 1949 to 8130 tons (261.4-264.6m troy ounces) in the 1980s.
What did India do.
From practically, 1939, (the start of WW2) gold imports into India were controlled or banned. This British legacy (aimed at colonial exploitative ends) was continued by Indian Government and RBI. Many Gold control laws were enacted which stopped all legal gold imports into India.
Our finance minister at that time – Late Morarjee Desai.
The other thing that happened was that gold imports went underground.
Gold (illegal) imports (called smuggling) spawned biggest criminals that India has seen. Karim Lala, Haji Mastan, Varadarajan Mudaliar, Yusuf Patel, Tiger Memmon, Chota Rajan, and of course, Dawood Ibrahim – a biological son of a police constable Sheikh Ibrahim Kaskar, was spawned by Morarjee Desai’s laws.
These laws corrupted four generations of Indians Government and politicians. It made gold in India very expensive – and the Indian buyer remained in poverty longer.