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A Re-examination of Gold Flows in India during the Inter-war Years
Having been an importer of gold through the 19th and early 20th centuries, for the first time in its recorded colonial history, India witnessed massive gold exports to the tune of over `3.5 billion in the latter half of the inter-war years. Gaps in the recording of trade statistics during the period coupled with an inadequate understanding of the colonial economy have led to wrongly accounting for these exports as commodity gold exports. A reclassification of India’s gold flows during the inter-war years shows that India’s gold exports, which rightfully belonged in the capital account, were an outcome of a distress-driven sale of assets by the Indian peasantry in the 1930s and aided Britain’s recovery from the depression.
Bailout for Britain
The main source of data on colonial India’s trade, namely the Statistical Abstract of British India (1840–1941), does not categorise gold inflows according to the purpose of use, into commodity and financial gold, as is done in the contemporary times. Hence, all gold flows in colonial India were treated as de facto commodity gold in economic history writings of the period, and this has perpetuated the myth that through the 19th and early 20th centuries, all of India’s gold imports were for the purpose of hoarding. On the other hand, during the worldwide Depression of the 1930s, India saw a decline in export surpluses, and a massive increase of gold exports of over `3.5 billion for the first time in its recorded colonial history. It has been wrongly concluded that
the sale of commodity gold helped keep India’s current account in surplus.
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