Can someone explain WHY we give India foreign aid???

Discussion in 'Current Affairs, News and Analysis' started by Semper_Flexibilis, Nov 8, 2009.

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    WASHINGTON/NEW DELHI: More than 18 years after New Delhi pawned 67 tons of gold to tide over a balance of payments crisis, the Reserve Bank of

    India has bought thrice that amount of gold from the International Monetary Fund to diversify its assets.

    The IMF on Monday announced the sale of 200 metric tons of gold to the RBI, saying it represented almost half of the total sales volume of 403.3 metric tons that was approved by the Fund's Executive Board in September.

    Welcoming the purchase of 200 metric tons of gold by India's RBI, IMF MD Dominique Strauss-Kahn said, "I strongly welcome this transaction with RBI."

    "It is an important step toward achieving the objectives of the IMF's limited gold sales program, which are to help put the Fund's finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries."

    For India, the purchase, apart from signaling that its economy has come full circle, is a way of spreading its assets which are said to be currently over-weighted with foreign currency, mainly in the form of sovereign US Treasury bonds. In other words, it is a hedge against a falling dollar.

    India is the world's largest private gold consumer, but the government's holding of gold as an asset is modest. Even so, the latest purchase puts it at Number 10 among the list of top 10 gold-holders in the world.

    Of India's current foreign exchange reserves of nearly $285 billion, foreign currency assets account for more than 90% ($268.3 billion), followed by gold ($10.3 billion), IMF's Special Drawing Rights ($5.2 billion) and a reserve position in the IMF of $1.59 billion.

    While India's current gold holdings, accounting for just 3.7% of assets, are said to be historically low, buying 200 tons in addition to the 358 tons it already holds is expected to bump up the gold reserves to more than 6%. The dash to gold is prompted by the unsteady dollar and countries such as China, Russia and Brazil have already gone this route.

    Commenting on the purchase, finance minister Pranab Mukherjee said, "It doesn't mean we don't prefer the dollar any more or like gold any better." Recalling the embarrassment of 1991, when India was forced to mortgage a part of its gold reserve, he said that when RBI recently asked whether it should invest in gold, he told the central bank it could do so to bolster the reserve. An RBI statement said the purchase of gold was made as part of the bank's foreign exchange reserves management operations.

    The IMF said the transaction, which is in the process of being settled, involved daily sales that were phased over a two week period during October 19-30, 2009, with each daily sale conducted at a price set on the basis of market prices prevailing that day.

    Officials said the total sales proceeds are equivalent to US$ 6.7 billion at an average gold price of $ 1045 per ounce.

    India's gold trauma occurred in the summer of 1991, when faced with dwindling foreign exchange reserves and a possibility of a default on payments, the government hocked 47 tons of gold to the Bank of England and 20 tons of gold to the Union Bank of Switzerland to raise $ 600 million.

    The move helped tide over the balance of payment crisis, and also kick-started the reforms process when the next Prime Minister, Narasimha Rao, appointed Dr Manmohan Singh as the finance minister.
  2. the_boy_syrup

    the_boy_syrup LE Book Reviewer

    That Space program won't fund itself
    Do you know how much astronaughts are on ?
  3. Because they are poor and third world and their population will all try to come over here otherwise...
  4. Commonwealth solidarity?'s the future apparantly
  5. If we don't give them money, they will claim we are racist. A lot of people in the Cabinet and Civil Service feel guilty that we once had an empire and by giving millions ex- members of our Empire makes them feel better. After all it's not their money is it?
  6. No I really cannot. The country is a disgrace. They spend billions on defence and Space and nothing on their poor.
  7. in_the_cheapseats

    in_the_cheapseats LE Moderator

    Have we not done this one in recent past?

    Saying that, even more ammo for us not to be sending aid. It is time for us to relook at the cash we send to India and I'd suggest start asking for something back..
  8. DieHard

    DieHard LE Book Reviewer

    Were paying for there education. They have more universities per head pf population than anywhere else on the planet , why do you think you never get to see dr smith or jones at your local gp's? dont forget they are also the largest democracy in the world so we have to keep there duly elected govt running lol
  9. We have to give them aid or people might think we're just bunging them some money for something or another...
  10. because someone's got to pay for their aircraft carriers.
  11. The answer I heard was that it was mainly to do with targets and infrastructure. IIRC we've signed various international agreements to help eradicate X, cut down Y, lift Z number of people out of absolute poverty. Since India already has decent infrastructure in the urban areas, bare basic infrastructure out in the sticks, has a pool of educated workers to draw on, is a fairly stable and democratic country, all in contrast to a lot of countries in Africa it's easier and cheaper to spend the development money there.
  12. It's for the same reason that the government gives foreign aid to China.

    It's for the same reason that the government gives foreign aid to Swaziland, in the knowledge that the cash will be intercepted by the king and used to fund his lavish lifestyle while his people are starving.

    It's for the same reason that the government gave 25 million quid last year, laundered through a pseudo charity called the Football Foundation, to the fecking Football Association so that impoverished souls like Wayne Rooney could be lifted out of poverty to know the joy of the beautiful game.

    It's because Gordon gets a warm feeling in his underpants every time he gives away a wad of our money.
  13. Its because Labour want to kiss indian butt so they get more votes when indians come to the UK to live.
  14. It's because it's not Labour's money to give away, it's ours - so they can get a philanthropic feeling for free, at the same time as assuaging post-Imperial guilt...

    Basically, they want to be seen as the saviours of the world. Now where have I heard that before...?
  15. To suck up to all the Asians now residents, and voters, in this country and to make the appalling oaf Brown feel important.

    India is rapidly becoming a 'financial first division' nation and are to be congratulated for that. Space may be enticing as is nuclear power and the most modern weapons are highly desirable.

    That said, the eradication of abject poverty, the provision of clean water, the establishment of universal education, the funding of health amenities, the eradication of the wholly unacceptable caste system, are also to be expected of a modern nation heading for the 'top table'.

    These payments to India should be stopped or drastically reduced forthwith!