1972 Government Debt Crisis

According to this link [0], Govt of India was in soveriegn debt crisis in 1958, 1972, 1968. What happened to the governement securities maturity and interest payments during those years ?

[0] https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises

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I don’t know much but I can say at that time our equity markets only not developed and so bond markets, for sure retailers would not have effected. Don’t know if RBI used to raise debt from general population and pass it to government like it happens today.

Historians say 1960s are the worst times Indians has to go through till now after independence.
Those are so bad we bought food grains from America to survive and eventually led to green revolution in India. We went through super inflation/droughts/ wars/depletion of foreign reserves and lots of political turmoil which eventually led to Nationilsation of banks in 1969-70.


Is there way to get this information ?. Zerodha coin [0] website says “Safer than Bank FD’s”. In 1971, there was war which mostly is the cause for sovereign debt crisis in 1972. I want to know if I will loose money in 2025 when India goes war with China ?. If in 2025, Govt of India decides to restructure debt, what is the policy there ? I want to know what happened in 1971 . Did Govt of India not pay in 1971 ? If so, it is not going to pay in 2025 and Govt securities are not safer than FD’s. I am a bit worried with my money in it.

[0] https://coin.zerodha.com/gsec

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If India goes to war and if government fails to honor debt then I am not sure if FDs are safe as there is no guarantee for FDs.
May be have some physical gold in portfolio if you want to have monetary hedge against war like events and pray India to win the war because if we loose I am not sure anything can save us.


In case of a national crisis and financial emergency, the govt. can seize our bank accounts and freeze the fixed deposits .etc. Mostly during war, it is done so. It’s called - Mobilization of resources to protect the sovereignty. It happened only once in my knowledge in pre-independent India in 1945, during World War II, when India fought for the British. BTW, Govt. does not pay you back or refund the same after the situation is restored back to normalcy. You just get a certificate of your contribution to the nation. Since India’s money and resources were already exhausted into the WW2, while fighting for the Britishers, they had sucked it all and when they realized nothing is left of us is when they decided to free India, basically abandon it. One of the many reasons India got independence in 1947.

This link talks further about instances when GoI breached sovereign guarantee or came close to doing so.


About wars, I don’t think we live in the times where there would be a direct confrontation anymore. Wars nowadays are fought on proxies. Trade and Economical wars, Societal (weakening a country from inside by making countrymen, communities fight with each other). War on the cyber world and data leakage. Wars of narratives with news and media. Bio terrors. etc. There are many fronts at which wars are fought and avoided. It’s all about posturing, more so today. Sometimes mute wars are fought with great diplomacy.

When I had visited Sweden, I spent a month visiting many museums and libraries there and I was surprised to learn that Sweden is the only country that didn’t fight a single war in the last 250+ years. It didn’t participate in World War 1 and 2. The neighbours - Germany, Poland and Norway were fighting with each other but Sweden said use my land as a bridge to corssover, but I don’t want a single drop of blood shed on my land. It supplied Steel to Germany (signed a pact with the strongest) in exchange for that protection from others. I was intrigued to know this fact, so I dig deeper to discover that Sweden was once a land of Vikings, who were barbaric in nature. So I started reading how did they transform so much that didn’t even participate in both the World War. The answer was they used diplomacy. It’s very interesting to know. When the entire world was burning and post world war 2, Sweden proposed the idea of United Nations and one world and became first member of UN. They invited the world to be part of UN. Then the next diplomatic action they took was they formed Nobel Peace Prize and started recognizing notable people for Nobel Peace Prize diplomatically every year. Can anyone imagine anyone touching them anymore?

Another interesting thing to note is - how Sweden didn’t fight any World War, but it supplied Steel to Germany. Similarly, if you remember the Kargil War (proxy war again) India fought against Pakistan, the controversial Bofors Tanks are made in Sweden. Bofors is a Swedish company that sold weapons to India and benefited from it, while India and Pakistan were fighting.

History is quite interesting to learn from. Today, India is doing vaccine diplomacy.


@nithin, since I was talking about Sweden above, I thought I should tell you another story.

So the reason why I keep telling that money how it flows in and out between Zerodha and investors can be made even better and seamless for e.g.

  • instant withdrawal of funds 24x7, one use case - so people would invest in instant withdrawal liquid funds on coin (now for this specific purpose they seek non-demat platforms)
  • after quarterly settlement when unutilized money is sent back to the bank account, another process realizes fund balance is zero and triggers to add funds automatically back from the bank account (an amount pre-set by the investor so the trading account is never zero and he doesn’t need to add funds manually) to maintain a balance always.
  • if on coin upon redeeming mutual fund units I could withdraw say 80% of redemption amount (after a haircut) instantly as LAS while AMC will credit redemption amount to Zerodha trading account in T+1/2 and Zerodha can recover it. So investor can pay the loan interest (LAS) for these 2-3 days only for this convenience of instant cash availability after redeeming (instead of waiting for T+1/2) and it being a secured loan since AMC would pay only the redemption amount in T+1/2

and many such instances where the flow of money can be made fluid and seamless.

Because during my Stockholm visit I learned that money and data are such that when it circulates like blood in your body without any hiccup, it creates value. The more money churns, the faster it flows, the more value it creates. Money is such a thing. This, I realized when I noticed that in Sweden I was able to use one single card for everything. one tap and your bus ticket, subway ticket, water boats, museum tickets everything was paid. Complete cashless society.

And with another example below about the flow of data.

It was an interesting incident. My brother who works in Nordea bank there was shifting his house in rounds. So we left some of his belongings in his new house and we went back to the old house. We had to change 2 metro trains to reach the old house. And when we reached the old house, we realized that he forgot his handbag on the train. Which train we don’t remember. We changed two trains in between. The bag had his passport, visa, house keys, office laptop, documents everything. It was a panic situation. We didn’t know which train it was. We went to the nearest metro station. Spoke to the station master. He asked where did we go to, the destination. We told the station name. He asked us to wait. Then he dialed a number and spoke on the telephone for 2 minutes. He then asked us back if it a blue bag. My brother said, yes it is. He said that the train is coming to that station on platform no 2. In exactly 10 minutes. Go and get it from the driver. We ran to that metro station and since it was new to us we didn’t realise which one is that train. So my brother just asked one of the train drivers randomly if this is the train coming from that station. The train driver asked us back, are you the one looking for the bag. My brother said, yes. That train driver said, No this is not the train. That train would come on that platform in exactly 2 minutes. Go fast. He escorted us. We ran to that next platform and in exactly 2 minutes that train arrived and we spoke with the train driver and got the bag.

We did a flashback and tried to connect the dots and understand what happened in those 2 minutes when the station-master spoke on phone -

What he did was he dialed all the trains plying to and from on that route (total of 160 trains we came to know later) and delivered an SOS message to the drivers that a bag is lost. The drivers on each of those trains then relayed that message inside their respective trains so all passengers can hear the SOS announcement and be aware that a bag is lost, if anyone sees a bag without any owner, please inform, one of the passenger in one of those trains pressed the button next to his seat (it’s an emergency button through which you can speak to the train driver) and told the driver that there is a blue bag lying next to him. The driver then on that SOS hotline informed everyone - all other train drivers and that station master by now knows that a blue bag is found on this train. And that’s how the station-master asked us back - is it a blue bag. By now all train drivers were aware of which train the blue bag was found (that’s why the other train driver asked if you are looking for the blue bag and this is not that train, it’s gonna come on that platform). All this happened in those 2 minutes on that SOS call with 160 trains. It was a full movie-scene like. It gave us goosebumps. We were just speechless and in awe of how data if connected can do wonders. I don’t think we would ever forget this incident.

Coming back to my point - data and money when it circulates like how we breathe in and out, how blood circulates in our body, it creates wealth, value, whatever you call it. It’s basically the communication. That’s why I insist on fluid flow on money in and out of Zerodha. I am bullish about India with UPI, and how earlier NEFT and then RTGS were made 24x7, just a few examples. Govt is also trying for seamless data flow. My brother there files tax with one single click. Because whatever you do, every transaction, everything is digital, and tax amount is pre-calculated already with each transaction. You don’t need a CA, audit etc. etc. Recently when we read that IT dept and SEBI will now share data, that’s good news. So Govt is also trying at all fronts for seamless flow of data. On a separate thread I was discussing with @Bhuvan why can’t the processes be made 100% paperless. Even if a physical signature is needed on the paper why can’t printed-signed-scanned copy can be digitally signed again with a DSC token or web services like Digio (digital signature only would be acceptable for everything some day) and sent by email, so we can reduce courier completely. That would be optimizing flow of data only.

That’s it.


I came across a research paper (Page 14) that very briefly mentioned about the Indian debt during 1972-1976 period -

For example, during the 1972–1976 external debt rescheduling episodes in India, interest rates (interbank) in India were 6.6 and 13.5 percent in 1973 and 1974, while inflation spurted to 21.2 and 26.6 percent.

From the budget documents of 1971-72 (Page 703) and 1972-73 (Page 610), there is indeed mention about Debt Reliefs / write-offs and Debt Re-scheduling / postponement arrangments but those mainly involve the debt that India had with the other countries (like Japan, US, UK, Germany, etc) and not with Indian citizens.

Note - Those budget documents are over 500MB in size, best to download them first and not directly open them in the browser. For archives of old Indian Budget documents, check this page