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The Nehru Memorial Museum & Library


‘India as a Creditor: Sterling balances 1940-1956’ ,22nd January, 2015.


‘India as a Creditor: Sterling balances 1940-1956’


Prof. Marcelo de Paiva Abreu,
Pontifical Catholic 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. It is important to evaluate comprehensively the costs incurred by India mainly in the process of reducing the balances from independence until 1953, when releases of the remaining balances were agreed within the scope of the Colombo Plan. There were different sources of accumulation of balances between 1939 and 1946. Balances were used to repatriate Indian sterling debt until 1943. A possible British "counterclaim" on India, entailing a partial cancellation of Indian balances was entertained by the British government. Complex Anglo-Indian sterling balance negotiations dragged between 1947 and 1953 and included 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. British divestment to reduce outstanding Indian sterling balances was also considered. There was a strong link between the accumulation of sterling balances and war time inflation in India, especially in 1942-43. The claims of British "repudiationists" were mainly based on the rise of prices affecting British military procurement in India. There were heavy costs involved in the adoption of the measures agreed on the remuneration and disposal of Indian sterling balances. The Indian experience should be contrasted with the cases of other sterling balance holders such as Portugal, Brazil and Argentina.



Prof. Marcelo de Paiva Abreu is a Professor of Economics at the Department of Economics at the Pontifical Catholic University of Rio de Janeiro. He has a Ph.D in Economics from Cambridge University and holds a grade IA scholarship funded by the Brazilian Scientific and Technological Development Council. He has been a visiting professor or scholar in universities in Britain, Italy and the United States. His publications are mainly in the field of financial and trade policies both contemporary and from a long-term perspective. Recent publications include chapters in the Cambridge History of Latin America and in the Cambridge Economic History of Latin America. On sterling balances he has published “Brazil as a Creditor, Sterling Balances 1940-1952” and “A Blank Cheque? Portuguese Second World War Sterling Balances, 1940-1973”, both in The Economic History Review.

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