Rupee Devaluation

In June 1966, under intense pressure from the International Monetary Fund, India devalued its rupee by 57% overnight — from ₹4.76 to ₹7.50 per US dollar. It was the most dramatic single-day currency move in independent India's history. The IMF had made devaluation a condition for a crucial $900 million loan, arguing that India's exports were uncompetitive and its trade deficit unsustainable.

Prime Minister Indira Gandhi initially resisted, knowing the political fallout would be severe. When she finally agreed, the public reaction was swift and angry — opposition parties called it a capitulation to foreign pressure. Import costs surged immediately across all goods priced in dollars.

Gold, which had been relatively stable through the early 1960s, responded to the currency shock as investors moved wealth into hard assets. Silver followed a similar pattern. The devaluation made imported commodities significantly more expensive in rupee terms overnight — a dynamic that would repeat itself in every future currency crisis.

The 1966 devaluation also marked a turning point in India's economic philosophy — the beginning of a decades-long debate between state-led planning and market-oriented reforms that would not be resolved until 1991. It showed, for the first time, how dependent India's domestic prices were on forces completely outside its government's control.