The paper starts by analysing the difficulties that a LDC like India and today’s transforming economies face in establishing a sovereign currency in a world of established monetary economies. Monetary constitution circumscribes a process in which domestic economic agents become willing to safeguard and generate wealth in terms of the national currency in the face of competition from foreign monies and real assets. It is a prerequisite for macroeconomic stability and economic development in a more conventional sense. India did not succeed in establishing a monetary constitution. The outcome was suppressed inflation, in which microregulation was intended to act as substitute for macrostabilisation. This resulted in persistent erosion of India’s monetary economy from the mid-sixties onwards. The ensuing deformations exhibit striking parallels between India today and the former planned economies of Central and Eastern Europe. In particular, a huge stock of bad debt, both of government and enterprises, is the main barrier to monetary constitution as well as more thorough reform. The most promising way of dealing with this problem of accumulated debt is considered to be a currency reform.