Division of Finances

The division of cash balances as well as allocation of public debt created tensions between the two countries. Pakistan wanted a one-fourth share of the total cash balances, but India had to point out that only a small portion of the cash balances represented the real cash needs of the undivided India and the rest was maintained only as an anti-inflationary mechanism. Ramachandra Guha writes in his India After Gandhi that the Indian government had withheld Pakistan’s share of the ‘sterling balance’ which the British owed jointly to the two dominions, a debt incurred on account of Indian contributions to the Second World War. The amount was some Rs 550 million. The Indian government was not keen to release the money due to Pakistan as it was angry with Pakistan for having attempted to seize Kashmir by force. Gandhi saw this as being unnecessarily spiteful. He went on a fast and made the ending of the fast conditional on the transfer of the money owed to Pakistan. He succeeded in pressurising the Congress leadership to decide to give more cash resources to Pakistan. (According to some scholars, this became one of the reasons for the assassination of Gandhi by a Hindu fanatic).