1966: WHEN INDIA'S IRON LADY BUCKLED UNDER U.S. PRESSURE AND DEVALUED THE RUPEE

Rupee was devalued by 57% at a stroke, paving the way for the US dollar as the world's reserve currency. What followed shaped history.

- PALAK SHAH

Most Indians don't know this—but for a brief, extraordinary period, the Indian rupee was not merely a national currency. It was a regional monetary anchor, stretching from Kathmandu to Kuwait, from East Africa to Southeast Asia. Before the US dollar conquered the world, the rupee actually moved it.

To manage gold smuggling and currency arbitrage, India had issued a special offshore currency: the Gulf rupee. Identical to the Indian rupee—but printed in red, with a “Z” prefix—it powered daily trade in the UAE, Qatar, Oman, Bahrain, Kuwait. India, by default, was a regional financial hegemon. Even East Africa—Kenya, Uganda, Tanganyika (Tanzania)—ran on rupees under the British system.

This gave India's rupee the status of what many nations still dream of—a currency accepted beyond its borders. Trust without treaties and power without military projection. All this was not lost in war. It was given up—when Indira Gandhi buckled under US pressure.

FIRST CRACK: THE SLOW SABOTAGE

India's first blow came quietly. In 1949, Britain devalued the pound. India, still tethered to the sterling system, followed automatically—without debate, without sovereignty. The rupee fell by about 30%. The dollar was suddenly Rs 4.76. This wasn't a policy choice. It was a colonial hangover. But the damage was limited. The rupee still held credibility. The Gulf still trusted it. Africa still used it.

The real rupture came later.

1966: INDIRA GANDHI'S DECISION

In 1966, India defused its own monetary standing and sovereignty for dollars. On an unremarkable morning that year, India woke up poorerquietly, clinically, and without public debate, the exchange rate had shifted from Rs 4.76 to Rs 7.50 to the dollar. With that single announcement, the Indian rupee lost something far more valuable than numbers on a chart. It lost credibility.