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Indian Sterling Balances (White Paper)

Volume 496: debated on Wednesday 20 February 1952

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asked the Chancellor of the Exchequer whether he will make a statement about the recent agreement with India on sterling balance releases.

The Indian Finance Minister and I have exchanged letters extending until 30th June, 1957, the Financial Agreement of 14th August, 1947 (as modified by later letters) which expired on 30th June, 1951. The letters, which give formal effect to undertakings already entered into between the two Governments are being issued as a White Paper today.The letters follow the lines of the agreement concluded by my predecessor with Pakistan last summer and announced to the House on 20th July, 1951, except that in this instance we have proceeded by an exchange of letters instead of by a new Agreement. We have followed the Pakistan precedent by providing that the sum of £310 million shall be transferred at once from India's No. 2 account to her No. 1 account as a Currency Reserve; it is the intention of the Government of India not to draw on this sum and they undertake not to do so without previous consultation with us.Provision is also made for releases of sterling from the No. 2 account over the six years beginning 1st July, 1951, at a rate not exceeding £35 million a year, except that the two Governments may consult together if in any year India's requirements are likely to exceed that sum; any balance still remaining on the No. 2 account at the expiry of the Agreement will be transferred automatically to the No. 1 account.