Although Indira Gandhi carried the can for it, the decision to devalue the rupee had been taken in the time of Lal Bahadur Shastri. In fact, he would have liked to clinch the issue before leaving for Tashkent for talks, under the Soviet auspices, with President Ayub Khan of Pakistan to bring peace back to the subcontinent after the 1965 War between the two countries. But he had some difficulty. We have the testimony of I. G. Patel, then chief economic adviser to the government and a key figure in the decision to devalue, that L. K. Jha, Secretary to the prime minister, and P. C. Bhattacharya, governor of the Reserve Bank, had “convinced” Shastri that devaluation was not possible for as long as T. T. Krishnamachari, a brilliant but stubborn man, was finance minister.

This advice, adds Patel in his book Glimpses of Indian Economic Policy, was “not unwelcome to the prime minister”. Yet, it was only 48 hours before leaving for the Central Asian city that Shastri could ease TTK out. He told his aides that on return home he would settle the devaluation question. Who could have foreseen that he would come back in a coffin?

Indira Gandhi was open to the idea of devaluation — being pressed hard by the World Bank, the International Monetary Fund (IMF) and, of course, the United States — but needed time to make up her mind. Her top advisers, including L. K. Jha who she had inherited from Shastri; and two trusted ministers, Asoka Mehta and C. Subramaniam, were for taking the plunge. B. K. Nehru, a distinguished economic administrator and Indira’s uncle then serving as ambassador to the US, joined their ranks. Her own knowledge of economics, at that point of time, being rudimentary, she was influenced by the expert advice.

... contd.