On Independence Day, India and Pakistan Split Money, Assets, a Buggy, and a Trombone

When India was divided into two countries 76 years ago, dividing the area between India and Pakistan was as simple as sketching boundaries on a map. According to historical records, Lord Radcliffe, the British Empire’s pick to divide the territories, simply arrived from London and ‘drew a line on a map’.

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While the geographical division was completed, there was still the issue of assets – not just monetary assets, but also persons and artifacts. That was a far more difficult divide to work out.

These assets were divided with varied degrees of severity. The ownership of a horse-drawn buggy belonging to India’s Viceroy was settled by a coin flip, which India won. The buggy was stationed at Rashtrapati Bhavan for the President of India’s usage. Three decades after it was banned from public gatherings for security grounds, then-President Pranab Mukherjee used it during the ceremony in 2014. Other assets, such as personnel, were distributed with caution.

A Council has been formed.

The Partition Committee, led by Lord Mountbatten and consisting of Sardar Vallabhbhai Patel and Rajendra Prasad representing the Congress and Liaquat Ali Khan and Abdur Rab Nishtar representing the All-India Muslim League, was in charge of the partition.

Nishtar was eventually replaced by Muhammad Ali Jinnah, and the panel was renamed the Partition Council, with 10 expert commissions tasked with overseeing the specifics of the separation.

While the Partition was not pleasant in any way, there were other aspects of the separation that went quite well, such as cooperative agreements in defense, currency, and public finance.

Dividing the Funds

As part of the Partition agreement, Pakistan acquired 17.5% of British India’s assets and liabilities, but it was not the end of the division, since Pakistan’s new central bank and the Reserve Bank of India had to agree on how to settle cash balances.

The Indian government had around Rs 400 crore in its coffers at the time, with the Partition Council allocating Rs 75 crore to the Pakistan central bank, which included a working balance of Rs 20 crore made available to Pakistanis in advance on August 15, 1947. For just over a year after independence, India and Pakistan were both handled by the same central bank, with the RBI shouldering the responsibility from August 1947 to September 1948.

Both nations intended to share the central bank until October 1948, but the date was pushed forward by a month as ties between the RBI and the Pakistan government deteriorated significantly over the Rs 55 crore payment agreed upon in 1947.

During this time, India and Pakistan shared money, with the expert group opting to keep the existing coinage and currency for both India and Pakistan until March 31, 1948.

The intervention of Gandhi

While the first tranche of Rs 20 crore was delivered to Pakistan on August 15, 1947, the remaining sum of Rs 75 crore became embroiled in a contentious subject — the Pakistani army’s invasion of Kashmir with the assistance of mercenaries immediately following Partition. India withheld the funds. 

The then-home minister, Sardar Vallabhbhai Patel, stated unequivocally that India would not agree to any payment until the Kashmir issue was resolved. Pakistan did not oppose it at the time. However, on December 22, 1947, during the last negotiations on the Kashmir problem, it objected to the handling of financial difficulties and the Kashmir issue together and requested an urgent transfer of Rs 55 crore. India stated that it stood by the deal, but that due to Pakistan’s hostile approach towards Kashmir, the payment would have to be postponed in accordance with their position throughout the talks.

However, according to the RBI’s history, Mahatma Gandhi was not pleased with India’s stance. “His view was that the balances must be released to Pakistan,” according to the RBI’s history. “In this regard, he even went on a fast.” In the circumstances, the Government of India reviewed the situation and announced on January 15, 1948, their decision to implement the agreement on cash balances immediately as a “Government’s contribution, to the best of their ability, to Gandhiji’s non-violent and noble effort, in accordance with the glorious traditions of this great country, for peace and goodwill.”

The outstanding issues

Both India and Pakistan now allege that the other party owes them money 76 years later. Every year, India dutifully adds a row in the “Outstanding Liabilities of the Central Government” section headed “amount due from Pakistan on account of share of pre-partition debt” to the Economic Survey. The debt is Rs 300 crore, which has been carried over since Partition.

In 2014, Pakistan alleged that India owed it Rs 560 crore because the RBI refused to transfer over certain assets to the Pakistani government. Similarly to the Economic Survey, Pakistan’s State Bank has meticulously added a row to its balance sheet saying that India’s Reserve Bank owes it money. Due to inflation, exchange rates, and other factors, the overdue sums have ballooned.

Assets that can be moved

All transportable assets, including office furniture, stationery, and even lightbulbs, were shared in an 80-20 ratio. The dividing process was sometimes chaotic, unexpected, and ludicrous.

Larry Collins and Dominique Lapierre’s book ‘Freedom at Midnight’ describes an intriguing experience. “The meanness of spirit and petty-mindedness that those divisions sometimes produced were staggering,” the authors write. “Superintendent of Police Patrick Rich of Lahore split his equipment between a Muslim and a Hindu constable. 

He disassembled everything: leggings, turbans, weapons, and lathi staves. The last lot included the police band’s instruments. Rich divided them up, a flute for Pakistan, a drum for India, a trumpet for Pakistan, and a set of cymbals for India, until only one instrument remained, a trombone. His two subordinates, who had been pals for years, erupted into a fist brawl in front of his eyes about who would get the final trombone.”

The regular bureaucratic routine of division now appears absurd. Each country received alternate volumes of the Encyclopaedia Britannica series. Dictionaries were cut in two, with A to K going to India and the remainder going to Pakistan.

“Arguments, bargains, and fights broke out over the division of goods,” Collins and Lapierre wrote. “Department heads attempted to conceal their best typewriters or replace broken desks and chairs with new ones assigned to their rival community.” Some offices were transformed into souks, with dignified men, joint secretaries in linen suits, whose writ flowed over hundreds of thousands of people, haggling an inkpot for a water jar, an umbrella rack for a hat peg, 125 pin cushions for a chamber pot. The debates over plates, cutlery, and pictures in state houses were heated. One point, though, went unmentioned. Wine cellars were usually given to Hindu India and Moslem Pakistan for what they held.”

Employees are being relocated.

The expert committees formed to oversee the Partition had just under 70 days to complete their tasks, with all departmental assets and financial obligations on the table and ready to be split.

A significant portion of these “departmental assets” were government officials distributed over the northern section of the country. Following multiple attempts to sort employees based on criteria ranging from geographical location to religion, the Council ultimately decided that employees would be given the option of serving either the Government of India or the Government of Pakistan, both at the central and provincial levels.

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When the governments counted their vacancies, they discovered that one had a surplus of workers while the other had an excess of vacancies. For example, the West Bengal administration experienced an inflow of personnel from what was once East Bengal, as people who had been assigned to various districts of undivided Bengal all chose to join the West Bengal government.

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