Administration of Indira Gandhi
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The one decisive step taken by the government to deal with the deteriorating economic situation and to bolster food imports boomeranged and proved to be the most controversial of Mrs Gandhi's early decisions. Indian exports were not growing and even the existing ones were being heavily subsidized by the central exchequer. Indira Gandhi’s advisers argued that this was due to the rupee being grossly over-valued. If it were devalued, there would be a greater inflow of the much-needed foreign capital. In addition, there was an urgent need for economic aid by the World Bank and the International Monetary Fund (IMF), stopped during the Indo-Pak war, to be resumed. The US, the World Bank and the IMF however, insisted on devaluation of the rupee. Consequently, the Government of India devalued the rupee by 35.5 per cent on 6 June, barely four months after Mrs. Gandhi assumed power.

There were angry countrywide outbursts against the decision. All sections of political opinion opposed the step, the majority of intellectuals and Kamaraj, who also resented the fact that he was not consulted before the decision was taken. The critics within the Congress party also felt that such a controversial and unpopular decision should not have been taken in an election year. The devaluation, ironically, failed in its stated objectives of increasing exports and attracting foreign capital. Nor was there a significant increase in the flow of food and other foreign aid.

A few months after coming to power, Mrs Gandhi took major initiatives in the field of foreign affairs. Urgently needing American wheat, financial aid and capital investment, she initially tried to build bridges with the United States, especially during her visit to Washington in March 1966. President Johnson promised to send 3.5 million tons of foodgrains to India under PL-480 and give 900 million dollars in aid. However, actual dispatches to India were irregular and came in small installments. Indira Gandhi felt humiliated by this ‘ship-to-mouth’ approach by the United States, and refused to bow before such ham-handed and open pressure. In Washington, Mrs Gandhi had agreed to the US proposal for an Indo-American Educational Foundation to be funded by PL-480 rupee funds to the extent of 300 million dollars. She now abandoned the proposal.

Mrs. Gandhi developed close links with Nasser of Egypt and Tito of Yugoslavia and began to stress the need for non-aligned countries to cooperate politically and economically in order to counter the danger of neo-colonialism emanating from the US and West European countries. Worried by the Soviet efforts to build bridges with Pakistan and to occupy a position of equidistance from both India and Pakistan, Mrs. Gandhi assured the Soviet leaders of India's continuing friendship. In general, after the Washington fiasco, she followed a policy of sturdy independence in foreign affairs.

The 1966 were one of continuous popular turmoil, of economic discontent and political agitations provoked by spiraling prices, food scarcity, growing unemployment, and, in general, deteriorating economic conditions. Adding to this unrest were the rising and often unfulfilled aspirations of different sections of society, especially the lower middle classes. Many were able to satisfy them but many more were not.


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