Viral messages and posts have falsely distorted observations made by former Reserve Bank of India Governor Dr. YV Reddy about India's political economic history in his book 'Advice and Dissent'. The messages misinterpret various sections from the book and string these instances together into a 700-word long tirade against the Congress-led governments of 1980s and 1990s, the Gandhi family and the World Bank. It also falsely states that India has never borrowed from the World Bank under the Prime Minister Narendra Modi-led government.
The book narrates Reddy's career and experiences of the various roles played by him - as a lecturer, with the Ministry of Finance, a stint at the World Bank, Governor of the RBI and chairman of the Fourteenth Finance Commission among others. The book was published in 2017, with the storyline ending in December 2014 with the submission of the finance commission's report.
The message in its entirety can be seen in the image below.
BOOM received the message on its helpline (7700906588). Using keywords, different versions of the message have been viral on social media since late 2018.
Claim 1: The RBI pledged 47 tons of gold to the Bank of England for just ₹40 crore in 1991.
Fact 1: This is false.
The RBI pledged 47 tons of gold for $405 million ($40.5 crore) to the Bank of England, according to the book, to overcome India's prevailing balance of payments crisis. This rationale behind the pledge was the sentimental value of gold in Indian society, and to signal that the problem was temporary.
For reference, the US government has stated that the dollar was worth 19.08 rupees as on March 31, 1991, making the loan amount approximately ₹727 crores at this rate. According to data provided by RBI, that the average annual exchange rate of 1991 was ₹22.69 to the dollar, making the loan worth more than ₹919 crores.
Claim 2: India pledged its gold with the World Bank
Fact 2: This is false
In 1991, India approached the International Monetary Fund for financial assistance to mitigate its low foreign exchange reserves and a balance of payments crisis. The IMF lends towards macroeconomic stability, and the World Bank towards long-terms economic development.
In his book, Reddy outlined his experience with the World Bank and how it handled loan negotiations with India, but did not mention gold pledging with them.
Claim 3: Gold pledged to the Bank of England was transferred by a van to by just 2 security guards and a driver.
Fact 3: The is distorted.
Reddy mentioned that in 1991, the van transporting the gold punctured a tyre during a night-time operation. He mentions that the sound of tyre burst drew some public attention. Armed guards escorting the van immediately surrounded the van. No mention is made of 2 guards or a driver. A photograph was taken while the gold was being loaded into the aircraft transporting it, and that the gold reached its destination safely.
Claim 4: The Congress mismanaged the economy in the 80's and the Bofors scandal broke out
Fact 4: Partly true
The books does contain an account of the diminishing state of the economy during the '80's and the associated political scenario.
States the book:
What were the origins of stress on our balance of payments that led to the crisis? The root cause can be traced to unsustainable fiscal policies of the early 1980s. The finance minister, Pranab Mukherjee, presented three budgets from 1982 to '84, that increased plan allocation to all ministries to spur growth. India was already in a debt trap by 1986.
Further, he sums up the Indian story during the 1980s, where he states that India did not heed to warning from multiple institutions about its declining economic situation.
In brief, political expediency to spur growth spur growth at any cost from 1982 led to an unsustainable situation by 1987. Warning by the IMF, the World Bank, and in particular by the RBI about the difficult conditions were ignored. From 1989, domestic political uncertainties and leadership changes made the the necessary bold policy action difficult, if not impossible.
Later, Reddy mentioned 1990, when the Gulf War started showing its detrimental impact on the economy.
The book only mentions Bofors in the context of exploring options to delay large-ticket payments. The option of delaying large payment obligations in the Bofors arms import contract was considered, without incurring a default as a relief measure to mitigate financial stress. But this exercise was to no avail, as the contract had precise import payment obligations. No mention is made of kickbacks or brokerage.
Claim 5: "Mr Y. V. Reddy further goes and writes that he was shocked & angry when people who earlier Mortgaged the whole country for just Rs 40 crore are now blaming and say that Modi Government has ruined India's economy"
Fact 5: This is false
The book does not write about the economy under the Narendra Modi-led government in detail. In the last chapter of the book, Reddy describes his tenure as the chairman of the Fourteenth Finance Commission. He formally worked under the Modi-led National Democratic Alliance (NDA) government in 2014 from May 26 to December 15, when he submitted the report of the commission. His book does not go into 2015 and beyond.
The book mentions Reddy seeking an appointment with Prime Minister Modi after he was elected to office, and making a customary call to him a few days after submitting the report. According to the book, Modi was informed about the recommendations in the report and the reasons behind them, but did not make his reaction known.
Claim 6: Reddy outlines that India has not taken loans from the World Bank under the Modi-led government (15-16, 16-17, 17-18 and 18-19), for the first time in India's 70-year history
Fact 6: This is false.
Firstly, as mentioned above, the book does not comment beyond December 2014. Secondly, a book published in 2017 could not possibly comment on lending in 2018 - 2019.
It is untrue that India has not borrowed under the Modi-led government.
The World Bank is made up of the International Bank of Reconstruction and Development and the International Development Associations. The former lends to creditworthy low and middle-income countries. The latter gives interest-free loans - or credits - and grants to the poorest of countries.
As of September 30, 2020, here's the total lending by the IBRD and IDA by financial year.
A screenshot of the total can also be seen here. The page has been archived as the World Bank tends to update these pages quarterly.
Projects in FY19 include an approved $80 million to PSU Energy Efficiency Services Limited for the Energy Efficiency Scale-Up Program and in FY20 include $30 million to the central government towards improving the quality of statistics in India, and $381 million towards the 'Second National Ganga River Basin Project'.
BOOM's mails to Reddy for comment went unanswered at the time of publication.
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