A NOTE ON DEVALUATION AND THE MEASURES

Summary

This two-page position paper, signed by N. G. Ranga and M. R. Masani and dated June 22, 1966, attributes India’s economic collapse to mistaken Union Government economic policies and planning over the preceding decade and a half. It treats devaluation as only one aspect of that crisis and argues that its benefits will be lost unless the government adopts a clear programme of monetary and fiscal restraint.

The proposed programme combines an end to inflationary policies, reductions in civil and developmental expenditure, deficit avoidance, restrictions on foreign borrowing, postponement and recasting of the Fourth Plan, lower direct and indirect taxes, and negotiations to reduce foreign-debt servicing costs. It also calls for dismantling permits, licences, import licensing, exchange controls, and Gold Control in order to increase production and reduce prices. Immediate relief measures include loans for stranded industrial projects, imported raw materials for exporters, withdrawal of new export duties, and abolition of import duties and surcharges on essential industrial inputs. The note explicitly invokes warnings by Swatantra Party spokesmen but does not identify the party as the issuer.

Key points

• Devaluation is presented as one consequence of accumulated economic-policy and planning errors.
• The government is urged to reject inflationary policies and observe fiscal discipline.
• The note recommends reducing non-developmental expenditure, deficit finance, civil-service recruitment, and foreign borrowing.
• The proposed Fourth Plan should be postponed and recast by dropping new capital projects outside essential infrastructure.
• Lower taxation and removal of permits, licences, exchange controls, and Gold Control are intended to expand production and reduce prices.
• Foreign-debt servicing should be reduced through negotiations with India’s creditors.
• Immediate support is recommended for stranded industrial projects, exporters who lost import entitlements, and users of imported raw materials and components.