After the Independence in 1947, higher imports and capital outflows, led by partition, resulted in significant deficit in the balance of payments necessitating running down of the accumulated sterling balances. However, the signs of strain in the balance of payments were clearly visible from the Second Five Year Plan (1956-61) onwards.
Though the devaluation of 1966 brought to the fore the problems associated with the overvalued exchange rate, it did not bring immediate desired improvement in the balance of payments position. The remittances from Indians working abroad became a new source of meeting the growing financing needs in the 1970s.