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Jamila Verghese

This was a psychological turning-point that was to shape her future attitude. Indira Gandhi turned inwards and like Joan of Arc, whom she often cited as one of her heroines, began to listen to her ‘inner voices’.

Rupee devaluation rollercoaster

Outlook magazine excerpt, 24 October, 2009, from BG Verghese’s memoirs, First Draft: The Making of Modern India, to be published by Tranquebar Press/ Westland Ltd, in February 2010.

Book extract from the Chapter, “Madam, Prime Minister, Sir”

One of the first things I had been told in great confidence by Asoka Mehta and C. Subramanium (members of Mrs Gandhi’s so-called “kitchen cabinet”) on joining as Information Adviser to the Prime Minister (in February 1966), was that the government was soon to devalue the rupee as part of a larger package of reform and aid. The decision had been taken in Shastri’s time, but had been put off on account of the Indo-Pakistan war and Shastri’s sudden demise. The decision was linked to the foreign exchange and food crises. Action by the government was to be matched by a substantial aid package to sustain the programme. Only eight or ten persons were in the know, all others being kept out of the loop though it would be important to prepare the ground and counter the expected backlash. The prime minister was to visit the United States on March 19 to tie up the aid package with the US President, Lyndon Johnson, who was willing to assist on conditions that ensured performance. The Secretary to the P.M, L.K. Jha, asked me to go to the US in advance, in order to ‘sniff the air’ and chat up the media.

I pleaded that an inter-ministerial preparatory group should be quickly constituted and speech writing taken in hand, after considering relevant policy issues including such matters as India’s view on the US bombing of Vietnam, a projected rise in our defence expenditure, the food prospects and the quantum and flow of PL 480 wheat shipments, the outlines of the new agricultural policy and the quantum and nature of the aid consortium-World Bank assistance package linked to devaluation.

I was amazed to find how little preparation had commenced. There was a lack of clarity on key policy issues and little coordination. It was every frog in his own well. Even on devaluation, I was concerned at the very close circuit of insiders that excluded such key players as the Congress President, Kamraj, the Commerce Minister, Manubhai Shah, and the Commerce Secretary. In the loop were L.K. Jha, Asoka Mehta, Subramanium, Dinesh Singh, Minister of State for Foreign Affairs, the Finance Minister, Sachin Chaudhuri, I.G. Patel, Economic Adviser, and Pitamber Pant of the Perspective Planning Division of the Planning Commission. Even Sushital Bannerjee, Joint Secretary to the PM and a key aide, was kept in the dark. K.N. Raj, now Director of the Centre for Development Studies in Trivandrum, was among the two or three outsiders consulted. The date and quantum of devaluation merited confidentiality in order to avoid speculation. But for the rest, it was difficult to understand the paranoia about secrecy, keeping out critical policy makers and key players whose responsibility it would be to carry the reform through politically and implement it purposefully.

The Prime Minister, innocent of political economy, did not really comprehend the intricacies of devaluation and the related aid and policy package that had been put together and negotiated by the experts. Her instincts told her that there would be a sharp political recoil, but she was persuaded to believe she could somehow manage. Among the cluster of issues that confronted her were the licensing of six large-size fertiliser plants to be built by the American firm, Bechtel, and a clutch of measures calculated to give a fillip to agricultural productivity, resulting in enhanced food production and a time horizon by when India might be liberated from dependence on PL 480 and other grain imports. Views were divided but there was a lurking apprehension that this could be the thin edge of the wedge to prise the Indian economy away from socialism.

* * *

And then began the mad rush to get a handle on the US visit. There was no clear line on the US bombing in Vietnam, which had caused grave disquiet in India and the Third World. In Parliament, Hiren Mukherji, the CPI MP, recited the Bengali lines that captured the national mood: Tero nam, Mero nam, Viet Nam, Viet Nam. C.S. Jha, the Foreign Secretary, advocated a middle line, with T.N. Kaul, another Secretary in the Ministry, taking the ‘Soviet line’ and B.K. Nehru, our Ambassador in Washington, adopting the ‘US line’. Mrs G waffled, her heart leaning to the ‘left’, her head cocked to the ‘right’.

India was expected to give a lead both as a major non-aligned nation and as Chairman of the International Control Commission for Indo-China. I was all for an unambiguous line, condemning the bombing but combining this with a Vietnamese undertaking to end Viet Cong infiltration. The debates raged fiercely and my drafts swung like a pendulum gone wild. Several conferences were held, many continuing late into the night and right up to our arrival at Williamsburg, a lovely colonial heritage township.

* * *

Before my departure, at one infructuous late night conference, the PM rose around midnight and said she was going to bed. Before leaving she turned and said, ‘George, you have heard us all. Now go write the speech’. I was dumbfounded! I wrote the ‘final’ draft of the four main US speeches before departing for Washington, handing over one set to L.K. Jha and carrying another for B.K. Nehru. The debate was resumed at Williamsburg, with B.K. Nehru present. As before, the three rival lines were repeated back and forth, B.K. Nehru arguing that the American PL 480 and aid package to India could be in jeopardy unless LBJ, who was facing a difficult situation at home over Vietnam, was offered an ‘out’. In the end, B.K. Nehru carried the day. The PM went soft on Vietnam and private investment (Bechtel) but the line was partly reversed in Moscow. This was probably the result of the combined influence of P.N. Haksar (our Deputy High Commisioner in London), who had joined the delegation, and Tikki (TN) Kaul.

LBJ, a giant of a man, was most solicitous of his guest and walked her down from the White House to Blair House where she was staying. He also gate-crashed into the Indian Embassy where B.K. Nehru was entertaining the PM and her delegation to dinner. As one wag put it, it took the Indian Prime Minister to visit Washington to reveal the gentleman in LBJ! The other quip that did the rounds was that the visit provided the first occasion for a US President to address a visiting head of government as ‘Honey’! At LBJ’s banquet, Isaac Stern, the violinist, gave a virtuoso performance, after which the dancing began. LBJ gallantly approached Mrs G and asked for a dance, which she demurely declined, saying, ‘Oh! What would my people think’!

The joint communiqué was easily settled and Bill Moyers, the President’s Press Secretary, and I jointly briefed the White House press corps. The US promised 3.5 million tons of grain to tackle the drought. Failure to provide an advance text of the speeches meant that media coverage was limited. In any case, popular interest ran ahead of political interest.

* * *

Back home, even as the drought loomed large, attention turned to devaluation as D-Day approached following a final round of consultations with the Fund and Bank and donor nations. Swaran Singh, the Foreign Minister, who had been spoken to, was aghast. Since the PM felt uncertain of carrying the Cabinet she asked L.K. Jha to suggest an alternative strategy. LK showed me the paper he had done. He advocated a floating exchange, a bonus voucher scheme and some fiscal measures. The package would, he felt, be more cumbersome and less effective than devaluation.

It was feared that devaluation might give the Opposition an electoral handle. If the PM insisted on going ahead, the Congress might split with some heavyweights throwing in their lot with Morarji Desai, the rival prime ministerial candidate. The other option, if challenged, was that the PM could advise the President to dissolve the Lok Sabha and call for elections in October. I favoured this course, as did Asoka Mehta and Subramanium, and worked on a broadcast titled ‘Operation Phoenix’. Though the food situation remained critical, it was argued that the patient might withstand surgery now, better than later, and that devaluation should be seen as a means of national rejuvenation.

On June 2, the PM called me to the South Block and said, ‘Now that you are privy to one top secret, I am letting you into another. You remember telling me to hold early elections. Well, I’m advising the President to dissolve the Lok Sabha so that I can go to the people. Put that in the broadcast too.'

The separation of the Lok Sabha polls from the general elections to the state assemblies was seen as a wily stratagem to dilute opposition to devaluation. A few hours later, Seshan, private secretary to the PM, called to say that the broadcast was off! Still later, LK was on the line asking me to prepare a broadcast on devaluation. YB Chavan, Defence Minister, was for it. The Fund and Bank were being formally notified of an announcement within the next forty-eight hours. Kamaraj had said no to Operation Phoenix as he believed it would cost the Congress the elections. Mrs G was worried and felt Kamaraj wanted to be prime minister. President Radhakrishnan asked him about his alleged ambition, to be told that language (his inability to speak either Hindi or English) precluded his becoming prime minister.

The Cabinet met on Sunday, June 5, 1966. Doubts and cautions were expressed and there was some expected waffling, but the final decision favoured devaluation. Manubhai Shah, Commerce Minister, was particularly unhappy. He had been kept in the dark though his Ministry would feel the brunt of the decision. Kamaraj was informed immediately thereafter. He was adamant in opposition and called it a ‘sell out’. On Subramanium describing him as ‘a wounded tiger’, LK’s comment was, ‘Well, in the circumstances, you know the rules of shikar (shoot to kill).’

I met the PM at 6 p.m. that evening. She had seen “Dr Zhivago” the night before, and later “Those Magnificent Young Men in Their Flying Machines”, to take her mind off problems nearer home. She was tense and tired and told me, ‘I’m scared stiff’. She worried that, with Kamaraj opposed, the Party might split and she would be held responsible – an interesting observation considering what was to happen three years later! I said she had taken the right course. People expected decision and leadership. ‘I hope you chaps are right,’ she muttered in reply. She then showed me a mysterious letter from the Burmese leader, Ne Win, received some days earlier, asking her to take special care of her security! She was also greatly taken with a poem by the famous Spanish bullfighter Domingo Ortega, sent her by Asoka Mehta about the loneliness of decision-making at the top, which John Kennedy had earlier cited during the Cuban missile crisis. It ran:

          Bullfight lovers ranked in rows
          Crowd the enormous plaza full.
         But only one man really knows,
         And he’s the man who fights the bull.

How true!

The press was briefed by Boothalingam, Economic Affairs Secretary, and I.G. Patel at 11.30 p.m.

The storm broke the next day. The headlines and editorials were mixed. I busied myself in private media briefings and feedback. The internal debate now turned to follow-up and implementation measures and the size of the Fourth Plan. The machinery of government took time to swing into action, given the secrecy and total surprise, while the aid package took time to unfold and was slower in delivery. In the event, the results of devaluation fell short of what had been projected. The prime minister felt let down. She had laid down the political gauntlet but her technical experts had not delivered as expected. The conclusion traumatised her. Yes, she was a novice and had shown implicit trust in her advisers, some of the most acclaimed economists and administrators in the land. And they had let her down. Who now could she trust but her own instincts and her family? This was a psychological turning-point that was to shape her future attitude. Indira Gandhi turned inwards and like Joan of Arc, whom she often cited as one of her heroines, began to listen to her ‘inner voices’. The outward bonhomie and charm remained but inwardly she became increasingly suspicious and aloof, and somewhat more radically populist. She had always described political labels in India and the Third World as necessarily being a little more to the Left than in the West. By the time the Emergency was declared in 1975, it was hard to disagree with the quip that Mrs Gandhi’s socialism was ‘a little Left of self-interest’! But in 1966, the mutation had only just commenced.

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