All that glitters is not sold

Those who lived through the brief but brutal border war with China in the high Himalayas in 1962 still remember the trauma it caused.

Written by Inder Malhotra | Published:February 20, 2009 12:37 am

Those who lived through the brief but brutal border war with China in the high Himalayas in 1962 still remember the trauma it caused. But most of them seem to have forgotten a very significant but,alas,aborted offshoot of it. What appeared on the Indian scene like the wind and disappeared like the whirlwind was the Gold Control Order through which the Nehru government unsuccessfully tried to weaken — no one could dream of eliminating it — this country’s age-old addiction to the yellow metal.

It later transpired that Nehru,Krishna Menon and some other ministers had been pressing Morarji Desai,then finance minister,to “do something” to reduce the country’s apparently insatiable hunger for gold that was causing serious damage to the economy. Officially,the import of gold was banned,of course,and the Kolar goldfields,the only ones in the country,produced precious little of the precious metal so much in demand. Consequently,the smuggling of gold into India became a high-profit international industry. Thanks to collusion by the Customs and the police,the risk was relatively low. And since payments for the smuggled gold were usually made through hawala,the rupee’s external value was constantly eroded. Desai agreed that the dangerous drain had to be stemmed. But nothing was done.

It was the 1962 War,seen at that time as a military debacle and a political disaster,that gave the government the opportunity to push through gold control. Initially,the shock of the Chinese advance down the Himalayan slopes had shattered national morale. But almost immediately the nation rallied round the government to defend India’s frontiers and freedom. The response to Nehru’s appeal for contributions in cash and,even more,in gold and jewelry was staggering. At public meeting after public meeting in various parts of the country,women in the audiences would remove all the jewelry they wore,except their wedding rings,and donate it for the country’s defence. “Ornaments for Armaments” became the buzzword. Even at those days’ prices,the value of the jewelry so donated was estimated at Rupees 50 crores.

In this heady atmosphere,the Union Finance Minister issued the Gold Control Order in January 1963 when the Chinese were gradually withdrawing from Indian territory after having announced a unilateral cease-fire on November 20 of the previous year. Although the terms of the order were very strict,the country seemed to take it in its stride. The order’s core was that hereafter gold in India would be refined only up to 14 carats — 10 carats lower than the standard 24 — and no more. Every gold refinery and authorised dealer had to declare its or his stock of gold; possession of anything more would attract severe punishment. And so on. A Gold Controller was appointed,and enforcement of the new regulations began in right earnest.

Within a short few months,however,the public mood began to change. Many said that gold control was an “unnecessary affliction” and was bound to add to the already rampant corruption. The goldsmiths (sunars) whose livelihood was threatened directly were up in arms. From all parts of the country they came to Delhi to stage demonstrations at Parliament House (the decision to keep demonstrators away from the building was taken later). The dismay of the goldsmith brotherhood mounted because none of their customers wanted to buy 14 carat jewellery. Rajinder Puri drew a brilliant cartoon,with the caption: “All that glitters is not sold”. The foolish proofreader,suspecting a typo changed it to the hackneyed adage “All that glitters in not gold”.

Above all,the Congress party that had a commanding majority in the Lok Sabha began to have second thoughts. Even those Congress MPs who had applauded gold control — some of them had said that it needed to be made stricter — found that their constituents did not like the Gold Control Order at all. The message they received was,in essence,that people couldn’t give their daughters as dowry “low-quality ornaments”.

No wonder Desai was startled when,in July 1963,during a debate on gold control,Congress MPs joined others in questioning the constitutional validity of the Gold Control Order and demanding that the Attorney-General be asked to come to the House and clarify the situation. Desai’s response was strange but entirely characteristic. He would not summon the Attorney-General,he said,“even if the whole House demands it unanimously”. In the midst of the uproar that followed,Ajit Prasad Jain,a former cabinet minister,rose and,addressing the Finance Minister,said curtly: “Morarji,this House is supreme,and we are all its servants. We would not tolerate any defiance”.

Mahavir Tyagi,another senior Congress leader and a former minister,appealed to the chair to adjourn the House. “That seems to be our only escape,” remarked Deputy Speaker (later Speaker) Hukam Singh,and adjourned the House till the next morning. When the House reassembled the atmosphere was totally changed. The Prime Minister was present,as was the Attorney-General,M. C. Setalvad. And although he endorsed the Finance Minister’s view that the order was valid under the Constitution,Desai was visibly subdued. Responding to the members’ feelings Nehru said that if any of the rules under the order were found to be harsh,it could be reconsidered. A month later,Desai was out of the cabinet under the famous Kamaraj Plan. The government first relaxed the Gold Control Order and then quietly withdrew it.

Two thoughts were uppermost in my mind then. First,that Morarjibhai had already lost the succession battle whenever it might actually take place. Secondly,I could not help recalling a report on the City of London I had read four years earlier. Prepared by a royal commission,headed by Lord Radcliff who,as Sir Cyril,had drawn the boundary between India and Pakistan in 1947,it had said in its chapter on London’s market dealing in gold “As long as there are marriages in India,the Gold Market can function in equanimity”.

The writer is a Delhi-based political commentator

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