India Buys Gold, Buries Past Shame

Burying past shame of 1991, when India had to pledge 67 tons of Gold to Bank of England and Union Bank of Switzerland to raise some $600 million to supplement a poor Foreign Exchange Reserve of $1.2 billion- barely good for three weeks of imports and a default in foreign exchange looming large- India recently purchased 200 tons of gold from IMF at a price of $6.8 billion, a peanut investment compared to present foreign exchange reserve of $285 billion.

The background in 1991: With the fall of successive governments of Viswanath Pratap Singh and Chandrasekhar in a span of about 16 months a financial chaos has set in coupled with the cascading economic effects precipitated by gulf war, resulting in swelling of oil import bills and decline in exports, drying up of credits resulting in foreign investors withdrawing their money, conservative financial policies on the footsteps of socialistic economy and so on.

The export of gold was cleared by the then finance minister, Yaswant Sinha, before the Chandrasekhar government fell. With the India National Congress (INC) returning to power in June1991, P.V.Narasimha Rao took over as prime minister in the vacancy caused in INC by the sudden violent death of Rajiv Gandhi by LTTE human bomb. It was the time when dismantling of Soviet block was in its final stage.

Narasimha Rao took the advantage of demise of Soviet block and unshackled Indian economy by inducting Dr.Manmohan Singh, (the present prime minister) as his finance minister, who put Indian economy on the path of liberalization and the result is for everybody to see now. India is sitting on the mountain of foreign exchange reserve of $285 billion and the Indian economy is vibrant in spite of the severe down turn in West.

With this gold purchase, India is now ranked 11^th, up from 14^th in September’09 as per World Gold Council statistics. India now has a gold reserve of 557.7 tons.