Tuesday, January 27, 2015

29 January 2015: India as a creditor: sterling balances, 1940-1956

Marcelo Abreu
Catholic Pontifical University of Rio de Janeiro

The British war effort during World War II depended on Lend Lease provided by the United States and the accumulation of sterling balances by neutrals and the Empire. Of the total sterling balances of £3,355 million outstanding in mid-1945 about 40% had been accumulated by India.

The paper seeks to evaluate comprehensively the costs incurred by India in the process of reducing the balances from independence until 1953 when releases of remaining balances were agreed within the scope of the Colombo Plan. The sources of accumulation of balances between 1939 and 1946 are examined. The use of the balances to repatriate Indian sterling debt until 1943 is described. The issue of a possible British “counterclaim” entailing a partial cancellation of Indian balances is analyzed. The complex Anglo-Indian sterling balance negotiations, which dragged between 1947 and 1953, are considered, including the disposal of balances through releases, transfer of assets to Pakistan resulting from the partition, settlement of pensions, purchase of military stores and British gold sales. The possible contribution of British divestment to reduce outstanding Indian sterling balances is assessed. The link between sterling balances accumulation and war time inflation in India, especially in 1942-43, and the claims of British “repudiationists” on the rise of prices affecting British military procurement in Indian are considered. The core of the paper centers on the evaluation of costs involved in the adoption of the measures agreed on the remuneration and disposal of Indian sterling balances. This will include comparisons with the cases of other sterling balance holders such as Portugal, Brazil and Argentina.

Date: January 29, 2015
Time: 03:00 P.M.

Seminar Room (First Floor)
Department of Economics,
Delhi School of Economics,
New Delhi-110007(INDIA)


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