The devaluation of the rupee in 1991 has been hailed as a success in India since soon thereafter, the trade balance improved and capital flight was arrested. Since non-traded goods are likely to be labor-intensive in India compared to importables, the paper demonstrates that the devaluation could have actually worsened the trade balance by reducing the domestic relative price of traded vs non-traded goods. The partial devaluation embedded in a subsequent policy called LERMS (Liberalized Exchange Rate Management System) seems more likely to be the instrument that was successful in improving the trade balance.