Thread by @SanskarBarot

🧵 THREAD: The Story of India's 1966 Devaluation - How America Twisted India's Arm & Indira Gandhi's Catastrophic Mismanagement

1/15 🚨 June 6, 1966 - A date that changed India forever. Indira Gandhi devalued the rupee by 57.4% under intense American pressure. This wasn't just economics - it was geopolitical arm-twisting at its worst. Let me break down this forgotten chapter of India's economic history.

The US, determined to protect the global supremacy of its dollar under Bretton Woods, leveraged this crisis. They cut offvital food aid (PL480), arm-twisting India, forcing devaluation of our rupee. Our nation was pushed into a corner by external powers!

2/15 📊 THE CONTEXT: By 1966, India was broke. Two wars (China '62, Pakistan '65), droughts, and economic mismanagement had drained forex reserves to their lowest since independence. Foreign exchange reserves fell to their lowest since independence.

3/15 🇺🇸 AMERICAN PRESSURE: The World Bank & IMF, dominated by US interests, made aid conditional on devaluation. India agreed to devalue the rupee by 36.5 percent, hoping to spur the moribund exports and spur import liberalization ahead of its Fourth Plan.

4/15 🎯 THE BELL REPORT: World Bank's Bernard Bell submitted a report in August 1965 making devaluation & trade reforms mandatory for aid. This wasn't advice it was economic blackmail.

5/15 🍚 FOOD AS WEAPON: The US terminated PL480 food aid in June 1965 when India needed it most. India is dependent on support from other countries to meet food supplies. The US unilaterally terminates food aid at a time when India needs it the most. Classic leverage tactics.

6/15 🏛️ RESISTANCE: Finance Minister T.T. Krishnamachari was initially defiant. World Bank President George Woods offers aid to India's Finance Minister T.T. Krishnamachari on the condition that India devalues the rupee. Krishnamachari is offended and vows not to comply.

7/15 💸 THE FINAL BLOW: By May 1966, India's forex cover dropped 65% in just 3 weeks. India's foreign exchange cover drops by almost 65% in a span of three weeks. Cornered and out of options, India finally prepares a package of import liberalisation, export promotion, devaluation

8/15 🔴 RBI'S WARNING IGNORED: The Reserve Bank of India had warned against devaluation as early as 1962. In an internal study, the Reserve Bank of India rules out devaluation. devalued rupee may make India's exports more attractive, but qty restrictions on will prevent growth.

9/15 🤝 THE BROKEN PROMISE: India was promised $900 million/year for 3 years. In return, India is promised US $900 million a year for 3 years. But donors quickly reneged - first tranche was delayed, second reduced to $600 million.

10/15 🎪 INDIRA'S FLIP-FLOP: Within 2 months, Commerce Minister Manubhai Shah (with Indira's backing) reinstated pre-devaluation schemes! Within two months, Commerce Minister Manubhai Shah, who was always staunchly against the devaluation, reinstates pre-devaluation schemes

11/15 📉 SPECTACULAR FAILURE: By 1967, even the World Bank admitted devaluation had failed. Within a year, the World Bank notes that devaluation has failed in liberalising the economy. India returns to its socialist status quo Exports declined, debt rose, recession hit.

12/15 🎭 THE POLITICAL THEATRE: Indira Gandhi played both sides - publicly accepting devaluation while secretly allowing its sabotage. This wasn't leadership, it was political opportunism at the cost of national interest.

13/15 💡 RBI WAS RIGHT: The central bank's 1962 assessment proved prophetic. Devaluation without structural reforms was doomed. But political pressure from America and domestic compulsions made Indira ignore expert advice.

14/15 🔥 THE ULTIMATE BETRAYAL: While India's economy burned, Indira Gandhi played politics with national sovereignty. She publicly accepted American diktat, then secretly sabotaged her own policy through backdoor deals. It was TREASON disguised as diplomacy!

15/15 💥 THE SMOKING GUN: This devaluation disaster was India's first taste of "Economic Colonialism" - where America used financial weapons instead of military ones. Indira Gandhi sold out India's dignity for empty promises. The scars lasted 25 years. NEVER FORGET! #India