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A huge bullion hoard was unearthed a few years ago at the Sree Padmanabhaswamy temple in Thiruvananthapuram, Kerala. Photo: AFP
A huge bullion hoard was unearthed a few years ago at the Sree Padmanabhaswamy temple in Thiruvananthapuram, Kerala. Photo: AFP

The old gold standard and more gilded tales

From yesteryear's addiction to Indian luxury products to a future of banned luxury imports

Roman patricians in the classical age were addicted to luxury goods imported from India—textiles, ivory, spices and jewels. Roman goods did not have a comparable attraction in Indian households. So gold was transferred to India as payment. It is no surprise that part of the massive bullion hoard that was unearthed in a hidden chamber at the Sree Padmanabhaswamy temple in Kerala a couple of years ago included Roman coins. There were also foreign coins from other historical epochs, from Venice during the Renaissance right down to France under Napoleon. Several commentators wrote at the time that the existence of these coins in the temple vaults showed that India was an active trading country in the classical era and that it had a large trade surplus with other parts of the world, a far cry from the later protectionism that strangled our economy.

The great Roman historian Pliny wrote about the addiction to Indian luxury products. He complained about the drain of gold to India. The Roman senate saw impassioned appeals to the aristocracy to reduce its use of Indian luxuries. Perhaps the men were told to stop using Indian cloth for their togas while the women were told to avoid Indian spices during the evening fiestas. I sometimes wonder how the great duo of René Goscinny and Albert Uderzo would have constructed an Asterix adventure with these debates in the background. It could perhaps have served as a useful introduction to economics, as Obelix and Co. and The Mansion of the Gods already are.

Those Romans were sure crazy. But some of their debates echo in our times. India today has a massive trade deficit; like classical Rome it does not make enough goods that are sought after in international markets. The trade deficit is not funded these days with a transfer of gold to other countries. The old gold standard has been buried. India now uses the dollars that international investors bring into the country to pay for its imports.

Yet, the old appeals to cut down on luxury consumption are still heard as a large trade deficit threatens to wreck economic stability. The Indian government has tried to increase taxes on products of luxury consumption such as gold, cars, laptops, mobile phones and exotic foods. That is good news for the smuggling networks that have never quite recovered ever since import controls were lifted in 1991. There are also impassioned appeals to citizens to voluntarily stop buying unessential consumer products that are made in other countries. A few months ago, finance minister P. Chidambaram appealed to citizens to reduce their gold buying. “I’m hoping that the people of India will heed my appeal and will not demand so much gold," he said on television.

I have no idea whether the Roman patricians responded positively to the appeals in the senate to cut down their buying of Indian goods, but economic historians do not seem to have noticed any major drop in Indian exports to Rome during the classical era. I have no idea whether Indians will react positively to contemporary appeals to reduce gold buying to help the economy, but I doubt it. And much has to do with the levels of trust Indians have in the political system that is making these appeals.

Let us step back to South Korea in 1997. A splendid economic boom had suddenly halted in its tracks. The currency had collapsed. The financial system was on its knees. The large companies could not repay their debts. The way Korean citizens reacted to the financial crisis was extraordinary. Ordinary citizens lined up outside banks to hand in their gold jewellery, trinkets and bullion bars. This gold was melted by government agencies that sent the yellow metal abroad to meet the nation’s obligations.

These personal sacrifices did not save South Korea; tough economic reforms combined with a more competitive exchange rate did the trick. But the massive public response to the economic crisis tells us a lot about the high levels of social trust in that country. Ordinary folk thought they should help, that it was their social duty. Something similar had happened in India during the 1962 war with China, with massive public help to soldiers after an appeal by the government led by Jawaharlal Nehru. It was seen a few years later when Lal Bahadur Shastri asked citizens to follow him in eating only one meal a day in the midst of a food crisis. Social trust has become far more fragile since then while public confidence in the political system is weak.

Back to classical Rome. After the death of Nero, emperor Vespasian eventually banned luxury imports from India as part of a larger attempt to reduce luxury consumption in the upper classes of his territory. Will we move in a similar direction? That is a slippery slope as Indians know very well; it will mean the creation of a corrupt bureaucracy with the power to decide what constitutes luxury consumption while opening up a fresh opportunity for the dormant smuggling rings along the coast.

(Note: This column owes a lot to a discussion I had with Chandrashekhar Nene, a corporate executive and amateur historian.)

Niranjan Rajadhyaksha is executive editor, Mint.

Also Read | Niranjan’s previous Lounge columns

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