With a few pieces of gold Jaithirth Rao Indian Express Home > Edits & Columns > Posted online: Thursday, July 12, 2007 Chandra Shekhar took a high risk way of avoiding a debt default. For today’s buoyant growth, thank him
The country was neck-deep in debt; our foreign exchange reserves were at a dangerously low level. We were all set to traverse the path of the profligate economies of Latin America. Suddenly, out of the blue comes forward this leadership team — clear-sighted Chandra Shekhar, sober Yashwant Sinha (his finance minister), brilliant Venkitaramanan (the newly appointed RBI governor), erudite Rangarajan (the economist deputy governor) — and they articulate something that is really rare in international finance. They assert with steely determination that under no circumstances will India default on its obligations. And to prove their point they are willing to undertake an ultimate gesture that very, very few sovereign nations have been willing to take. They physically move some of the country’s gold abroad, pledge it and raise money. What an astonishing signal that was to the external world. The Claudillos of Latin America were always looking to reschedule, to renegotiate and, more recently, to abrogate their obligations. Here was a country far poorer in per capita terms and with a stronger case, but it was choosing to not even consider for a moment such a course of action.
To honour one’s debts is something enjoined on us by our ancients as a dharma. We even have a saying that if we welsh in this life, we will get caught with having to pay it back in the next. The Sanskrit word ‘runa’ refers to something that sticks to you. In honouring the debts incurred by previous administrations, Chandra Shekhar’s team was being faithful to their rajdharma. As we all know, good ethical behaviour is usually tied up in the long run with good material outcomes. (Where dharma reigns can artha be far behind?) And that is precisely what happened. The country which went to the brink came back with a bang and is today not just solvent, but it is so in a manner that is so healthy it almost smacks of plenitude.