Indira Gandhi’s decision to devalue the rupee in 1966, as Lal Bahadur Shastri had intended to do, was controversial
On June 6, 1966, less than six months after coming to power, Indira Gandhi announced a 35 per cent devaluation of the rupee and courted much greater and deeper trouble than at any time until then. The word “tsunami”, not in vogue at that time, would have been an appropriate description of the storm of protest that greeted her. Several newspapers reported the next morning that as soon as the announcement was made on All India Radio at 9 pm, “all hell broke loose”. The devaluation, most Indians believed, was the “ultimate” in her “sell-out to America”. (Some numerologists said later that the combination of the sixth day of the sixth month of the 66th year of the century was “manifestly ominous”.) There was exquisite irony in this, however. For, while Indira Gandhi did carry the can, the decision to devalue the rupee was all but taken in the time of Lal Bahadur Shastri. But he could not announce it before leaving for Tashkent for peace talks with President Ayub Khan of Pakistan under Soviet auspices on January 3. This happened because it was only on the last day of 1965 that he could ease out then Finance Minister T.T. Krishnamachari (better known as TTK), who was stoutly resisting devaluation. Shastri’s trusted advisershis secretary, L.K. Jha, the governor of the Reserve Bank, P. C. Bhattacharya, and the ambassador to the United States, B.K. Nehru had persuaded him much earlier that devaluation was good for India. They had also told him bluntly that until TTK was sacked, there could be no devaluation. During the early part of her career as prime minister, Indira Gandhi’s grasp of economic issues was virtually non-existent. In fact, she once told a press conference that the two greatest economic problems before the country were “inflation and rising prices”. The press corps had laughed indulgently. On devaluation, therefore, she was guided by the same advisers that she had inherited room Shastri. This ime round, however,these officials had the crucial support of two politicians the prime minister liked: agriculture minister C. Subramaniam, and deputy chairman of the Planning Commission, Asoka Mehta. Finance Minister Sachin Chaudhuri, appointed by Shastri after ousting TTK, was an eminent lawyer and a man of impeccable manners. But in economics and finance, he was illiterate. He, therefore, did whatever he was told. At 9.30 pm on June 6, he made a broadcast to the nation justifying evaluation. It was written by others and the text was handed to him an hour earlier. All discussions on the subject were held in such strict secrecy that the cabinet was informed of it only at the eleventh hour. Only Manu bhai hah, the highly competent minister for foreign trade, dissented. All others duly fell in line. At this late stage, it occurred to Indira Gandhi thats he must consult the powerful Congress president, K.Kamaraj. When he came and was told what as afoot, he hit the ceiling. This was the first grim warning she received about what she had landed herself into.