India secretly airlifted gold in 1991 to avert default

In July 1991, India secretly airlifted 46.91 tonnes of gold from RBI vaults in Mumbai to London, pledging it to raise $405 million in emergency loans. The operation, involving the Bank of England and Bank of Japan, came as foreign exchange reserves fell to cover only weeks of imports. Times Now reports that earlier, in May 1991, 20 tonnes of confiscated gold were sold to Union Bank of Switzerland for $200-215 million. Together, these transactions bought India time to avoid a sovereign default.

The crisis had roots in the 1980s: fiscal deficits, high oil imports after Iraq's invasion of Kuwait, and political instability. The Economic Times notes that India's gold played a 'reserve asset' role when international lenders lost confidence. But decades earlier, the government had tried to curb gold demand through the Gold (Control) Act of 1968. Times Now says the act imposed strict limits on bullion ownership and mandated 14-carat jewellery, which drove demand underground and fuelled smuggling, with illegal gold fetching a 40-80% premium over London prices.

The Gold (Control) Repeal Act was passed on June 6, 1990, under Finance Minister Madhu Dandavate. Barely a year later, India's crisis forced the government to pledge gold again. The RBI's covert airlift became an enduring symbol of the country's economic desperation, as both sources recount. The episode underscored how regulation and crisis pushed households and the state to rely on gold as a last-resort asset.