When India faced a balance-of-payments crisis in the late 1980s and early 1990s, the Reserve Bank of India (RBI) in 1991 airlifted nearly 47,000 kg of gold to England to raise a $405-million emergency loan and prevent a sovereign default. The shipment, carried out in secrecy and under tight security, was one of the defining moments that paved the way for India’s economic reforms.
“Secret sale of gold by RBI again. 21,000 kg of metal airlifted to coded destination.”
This was the front-page headline of a leading English daily on July 8, 1991, when Indians and the world discovered that the Government of India had quietly begun sending the country’s gold reserves out of the country. Beneath the headline was an image of trunks being loaded onto a cargo aircraft at Bombay’s Santa Cruz Airport (now Mumbai Airport’s Terminal 1). Just days earlier, on July 4, the first consignment had already left. Two more shipments followed after the news broke. In the summer of 1991, the Reserve Bank of India (RBI) “secretly pledged” and airlifted nearly 47 tonnes (or 47,000 kg) of gold to England as the nation stared at a devastating balance-of-payments crisis.
The move by the RBI, under Governor S Venkitaramanan, came after deliberations over several emergency options. It was finally decided to borrow around $405 million by pledging gold to a foreign bank at a time when India had barely enough foreign exchange reserves left to pay for about a week’s worth of imports.
In India, gold is security, pride and sentiment. It’s also a source of anxiety. Some saw the government’s move as a national humiliation as much as an economic crisis. It was a time when India was even forced to sell 20 tonnes of confiscated gold to raise $215 million as it desperately needed foreign exchange (forex).
Discussions on the move started early on when Chandra Shekhar was the prime minister (November 1990-June 1991) and was heading a caretaker government led by the Samajwadi Janata Party (Rashtriya).
These emergency gold-backed measures of the early 1990s helped India avoid a sovereign default on its external payment obligations and stabilised the country long enough for the new government of Prime Minister Narasimha Rao to launch landmark economic reforms amid a major crisis. The Rao government took over on 21 June 1991, weeks before the gold was airlifted by the RBI and moved out of India.
“The initiative to pledge gold was taken by the RBI. It, of course, needed the permission of the government, which was given. It was a bold decision by a government which at that time was only a caretaker government led by Chandra Shekhar. It showed great wisdom and courage. That was the starting point,” journalist Shankkar Aiyar, who broke the news in The Indian Express, wrote in his 2012 book, Accidental India: A History of the Nation’s Passage Through Crisis and Change.
HOW MUCH GOLD DOES INDIA HAVE? MODI’S MESSAGE ON GOLD IS AIMED AT SAVING FOREX
As Aiyar called it a “starting point”, this set the stage for India’s economic liberalisation. India has since witnessed a turnaround in gold reserves. As of March 2026, the RBI held about 880.5 tonnes of gold worth over $115 billion. A majority of the gold is now stored domestically. The RBI repatriated more than 100 tonnes from abroad in recent years, according to reports.
Although gold always trends, it’s a talking point again. PM Narendra Modi has twice urged Indians to avoid or defer non-essential gold purchases for at least one year to reduce pressure on India’s foreign exchange reserves and the Indian Rupee. The appeal came amid the ongoing US-Israel-Iran war in the Middle East. Oil prices have shot up for India and the import bill has increased.
Like now, when India is facing the heat of the Iran war, back in 1991, the Kuwait war hit the economy of the nation, which had just started to roam in an open market.
Modi described gold imports as a significant drain on forex. He also asked citizens to cut fuel consumption, avoid unnecessary foreign travel, and consider work-from-home where possible. Following the appeal, the government hiked gold and silver import duties to curb imports.
India imported around $72 billion worth of gold in 2025-26. That is roughly 178 times the $405 million India raised by pledging gold in 1991.
WHEN INDIA BARRED MAKING OF GOLD ORNAMENTS OVER 14 CARAT
Gold is gold and has been so for centuries. Wars have been fought in India and elsewhere over the precious metal.
In post-Independent India, gold had sensitive economic and political issues. The country imported large quantities of gold (like we still do), draining precious foreign exchange at a time when dollars were scarce. Governments have tried to curb demand through strict controls, bans and taxes.
In 1962, after the war with China worsened forex position, the government introduced the Gold Control Rules. The measures became even stricter under Finance Minister Morarji Desai, who piloted the Gold Control Act in 1968. The moves banned citizens from holding gold bars and coins and restricted jewellers from making ornaments above 14 carats (in 1963). The measures upset India’s traditional gold trade.
In a letter dated April 1, 1963 to PM Jawaharlal Nehru, Desai defended the restrictions, saying, “The free use of 24-carat gold… has had to be prohibited because it is in this form that smuggled gold comes into the country and circulates”.
Desai also argued that the crisis facing goldsmiths was being exaggerated. He assured that “meenakars” and “kundan workers” producing for exports and tourists would receive “suitable quotas of 24-carat gold” under regulated conditions.
The government wanted to stop Indians from buying new and hoarding gold so that the import bill would fall, and foreign exchange could be saved. But the restrictions backfired. Smuggling boomed across India’s coasts. Kerala, Gujarat and Maharashtra became hotspots. By the 1980s, gold smuggling syndicates had become entrenched.
Even as India tried to stop gold imports, Indians continued seeing gold as security during uncertain times.
HOW DID INDIA REACH THE EDGE OF DEFAULT IN 1991?
By 1990-91, India’s economy was collapsing under rising debt. Political instability was severe and foreign exchange shortages were lurking in the sluggish and stagnant economy. The crisis worsened after the January 1991 Gulf War. Oil prices shot up and the flow of remittances from Indians working in the Gulf was disrupted. This was when 750 oil wells burned for nine months and brought black rain over the Himalayas.
By the spring of 1991, barely enough dollars left to pay for about a week’s imports were left in the exchequer. Agencies downgraded India’s credit ratings, foreign lenders lost confidence and the government struggled to raise emergency loans.
In Accidental India, journalist-author Shankkar Aiyar described the atmosphere of panic around the new government of PV Narasimha Rao. With 244 seats, he was leading a minority government. Cabinet Secretary Naresh Chandra handed PM Rao a note detailing “the economic crisis” and another laying out “the blueprint for the revival of the country’s economy”.
“Several steps were being taken to activate the RBI’s gold holdings,” C Rangarajan, who was then the deputy RBI Governor and went on to become full-time governor, wrote in his memoir, Forks in the Road: My Days at RBI. “The first step was to revalue the gold holdings at market price.”
The second step was the government approving a proposal to raise foreign exchange by pledging confiscated gold. The third was the far more sensitive move to pledge the RBI’s own reserves, which led to 46.91 tonnes of gold being airlifted to the United Kingdom in July 1991, Rangarajan detailed in his book.
The RBI and the government believed gold-backed borrowing was the fastest way to prevent India from defaulting on external payments.
HOW WAS INDIA’S GOLD PLEDGE PLANNED?
The operation to transport gold from India to abroad unfolded in two stages.
First, in May 1991, the government arranged a swap deal using 20 tonnes of confiscated gold through the State Bank of India (SBI) and Union Bank of Switzerland. The move raised around $215 million. But that was not enough.
The RBI then proposed using its own reserves. Rangarajan wrote that “the initiative to pledge gold was taken by the RBI” and that the caretaker government led by Chandra Shekhar approved the plan with “wisdom and courage”.
The central bank explored options with major institutions abroad. Under RBI rules, India could borrow only from another “currency authority”, meaning a central bank. Eventually, the Bank of England and the Bank of Japan emerged as possible lenders.
There were practical problems too. Much of the RBI’s gold was stored in forms that did not satisfy London Good Delivery standards. Officials had to sort, weigh, repack and insure the bars under extreme secrecy.
Rangarajan recalled that “packing, insuring and finally sending the gold through the airlines had to be done in a short span of time without attracting much attention”.
HOW WAS RBI’S GOLD SECRETLY AIRLIFTED FROM MUMBAI?
Beginning July 4, 1991, the RBI started flying gold out of Mumbai in four consignments. In total, 46.91 tonnes were airlifted, mainly to the United Kingdom, helping India raise about $405 million. The operation resembled a covert security mission.
Gold was moved in RBI bullion vans from vaults in Mumbai to Santa Cruz Airport under armed convoy protection. One consignment reportedly had to halt briefly after fears of a tyre burst in the escort convoy. The secrecy was so intense that customs authorities needed special authorisation because the shipment declaration rules themselves became a problem, according to Rangarajan’s book, Forks in the Road: My Days at RBI.
“A special authorisation from the finance ministry had to be obtained to send gold without such a declaration,” he wrote.
Then came the moment the operation slipped into public view. On July 8, 1991, The Indian Express carried the headline with the image from Bombay’s Santa Cruz or Sahar Airport. The report by Shankkar Aiyar shocked the country. Aiyar later wrote that the gold pledge “woke people up to the enormity of the crisis”.
“…Crates of gold were being furtively unloaded from the dull-grey vans of the Reserve Bank of India (RBI) into the loading bays of a heavy-bellied cargo aircraft,” Shankkar Aiyar wrote in his book.
