Did You Know About 6/6/66, The Day That Forever Changed The Economy Of India

Half a century ago, June 6, 1966 - or 6/6/66 - turned out to be a defining day in independent India's economic history. It was the day on which Indira Gandhi devalued the rupee by 36.5%, increasing the dollar's value against it by 57.4%. The move sparked bitter, nationwide criticism.

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In both politics and economics, 1966 was India's annus horribilis. On January 11, Prime Minister Lal Bahadur Shastri - a popular, respected figure - died of a heart attack at Tashkent, and was replaced by Indira. Apparently, the Congress party old guard had conspired to install an inexperienced person, so they could call the shots.

Indira's inheritance in 1966 was onerous. Drought had ravaged foodgrain crops, forcing India to import rice and wheat for the first time. This was easier said than done, for India's foreign exchange reserves were sparse. In 1965, with imports of Rs 2,194 crore and exports of only Rs 1,264 crore, India's trade deficit of Rs 930 crore was the highest during the sixties.

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With no money to import food, India sought aid from the US' ('friendly foreign government' - is this really necessary), whose 'Food for Peace' programme - authorized by Public Law 480 (PL-480) - allowed poor nations like India to pay the US in their own currency. President Lyndon B Johnson obliged by shipping 16 million tonnes of wheat, and 1 million tonnes of rice to India, and disbursing approximately $1 billion to alleviate her financial strain. Indira Gandhi's decision to accept this "ship-to-mouth" aid was unpopular.

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Union finance minister Sachindra Chaudhuri - an eminent lawyer who had been inducted by Shastri to replace T T Krishnamachari - said on February 28, 1966 in his Budget speech: "With the best will in the world and the utmost effort we are capable of, we still cannot dispense with foreign aid in the near future."

However, when aid was cut off and India told to liberalize its economy, Indira Gandhi reacted with swift bravado. In one fell swoop, on June 6, 1966 (the decision was taken late on June 5) she devalued the rupee, making the dollar worth from Rs 7.50, a 57.4% increase from Rs 4.76. The change was widely criticized, and was described as the "ultimate sell-out to America and the World Bank," but carping ceased when Gandhian Morarji Desai replaced Chaudhuri.

But devaluation worked. India averted both famine and bankruptcy. By fiercely implementing import substitution as state policy, Indira brought the deficit down to Rs 100 crore in 1970. The following year, India liberated Bangladesh, and was conferred the Bharat Ratna. By now, thanks to the 'Green Revolution' masterminded by Norman Borlaug in the mid-sixties, India was already self-sufficient in rice, wheat and maize, and searching for export opportunities. Borlaug was awarded the Nobel Peace Prize in 1970. Indians were euphoric with their self-esteem redeemed.

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The verdict of history will forever be that the exercise of grit and guts 50 years ago brought India a manifold legacy of short and long-term benefits. Today, few are aware of, or are bothered by the fact that on August 15, 1947, the rupee-dollar exchange rate was a dollar to a rupee. Parity stands devalued in 2016 by 6,600%. So where do we go from here?