Delinking ‘the two rupees’: The devaluation dilemma and economic divergence in the decolonized subcontinent, September 1949–February 1951

By looking at the September 1949 dilemma on devaluation faced by the governments of Pakistan (and India), this article argues that it was an early episode of divergence between them following partition. The reasons for Pakistan to not devalue when India did so, have remained largely obscured in historiography. Deeply contested, the decision was a determining event through which the state staked its claim for economic sovereignty, internally and externally. It led to an official trade deadlock of seventeen months, especially in the eastern region of partitioned Bengal. It ended when the two governments established an exchange ratio for the two rupees, no longer at par with each other. This interactive delinking of currencies was symptomatic of the improvisational decoupling of the colonial subcontinent’s post-colonial states. In tracing its trajectory, this article contributes to the inconsiderable literature of why devaluation did not happen in Pakistan, revises the rationale offered and presents it as a contingent exercise in economic decolonization, generative of a post-colonial sovereign difference.