History of Indian Rupee

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HISTORY OF INDIAN RUPEE

Early uses

Rupiya issued by the Sher Shah Suri, 1540–1545 CE

Ancient India in circa 6th century BC, was one of the earliest issuers of
coins in the world, along with the Chinese wen and Lydian staters. The first
"rupee" is believed to have been introduced by Sher Shah Suri (1486–
1545), based on a ratio of 40 copper pieces (paisa) per rupee.
The word rupiya is derived from word rūpa, which means "wrought silver, a
coin of silver",[3] in origin an adjective meaning "shapely", with a more
specific meaning of "stamped, impressed", hence a "coin". It is derived from
the noun rūpa "shape, likeness, image".
During his five-year rule from 1540 to 1546, Sher Shah Suri set up a new
civic and military administration and issued a coin of silver, weighing
178 grains, which was termed the Rupiya.[3][6] The silver coin remained in
use during the Mughal period, the Maratha era (1674–1818)[7] and in British
India, as well.

Coinage since the British period


Main articles: Indian coinage, British Indian coins, and Modern Indian coins

1 Paisa coupon issued by Sayla state

The British settlements in Western India, South India, and the Eastern
Province of Bengal (Calcutta) independently developed different coinages
in consonance with the local acceptability of the coins for the purposes of
trade.

Obverse: Crowned bust of Queen Victoria

Coin made of 91.7% silver

Half anna (2 paisa) coin; an anna = 4 paisa, George VI series, 1945

There are many fake coins of East India Company, with Indian gods
depicted on the obverse side as shown in side-bar. Original East India
Company coins show only the coat of arms of the East India Company.
The coins of Bengal were developed in the Mughal style and those
of Madras mostly in a South Indian style. The English coins of Western
India developed along Mughal as well as English patterns. It was only in
1717 AD that the English obtained permission from the Emperor Farrukh
Siyar to coin Mughal money at the Bombay mint. The British gold coins
were termed Carolina, the silver coins Anglina, the copper coins Cupperoon
and tin coins Tinny. By early 1830, the English had become the dominant
power in India. The Coinage Act of 1835 provided for uniform coinage
throughout India. The new coins had the effigy of William IV on the obverse
and the value on the reverse in English and Persian. The coins issued after
1840 bore the portrait of Queen Victoria. The first coinage under the crown
was issued in 1862 and in 1877 Queen Victoria assumed the title the
Empress of India. The gold silver ratio expanded during 1870-1910. Unlike
India, her colonial master Britain was on the gold standard. To meet the
Home Charges (i.e., expenditure in England) the colonial government had
to remit a larger number of rupees and this necessitated increased taxation
and unrest.
British Indian 1 rupee, 1917

The 1911 accession to the throne of the King-Emperor George V led to the
famous "pig rupee". On the coin, the King appeared wearing the chain of
the Order of the Indian Elephant. Through poor engraving, the elephant
looked very much like a pig. The Muslim population was enraged and the
image had to be quickly redesigned.
Acute shortage of silver during the First World War, led to the introduction
of paper currency of One Rupee and Two and a half Rupees. The silver
coins of smaller denominations were issued in cupro-nickel. The
compulsion of the Second World War led to experiments in coinage where
the standard rupee was replaced by the "Quaternary Silver Alloy". The
Quaternary Silver coins were issued from 1940. In 1947 these were
replaced by pure Nickel coins.
Immediately after independence, the British coinage was continued. The
Monetary System remained unchanged at One Rupee consisting of 64
pice, or 192 pies.
The "Anna Series" was introduced on 15 August 1950. This was the first
coinage of the Republic of India. The King's Portrait was replaced by the
Ashoka's Lion Capital. A corn sheaf replaced the Tiger on the one Rupee
coin. The monetary system was retained with one Rupee consisting of 16
Annas. The 1955 Indian Coinage (Amendment) Act, that came into force
with effect from 1 April 1957, introduced a "Decimal series". The rupee was
now divided into 100 'Paisa' instead of 16 Annas or 64 Pice. The "Naye
Paise" coins were minted in the denominations of 1, 2, 5, 10, 20 and 50
Naye Paise. Both the Anna series and the Naye Paise coins were valid for
some time. From 1968 onward, the new coins were called just Paise
instead of Naye Paise because they were no more naye = new.
With high inflation in the sixties, small denomination coins which were
made of bronze, nickel-brass, cupro-nickel, and aluminium-bronze were
gradually minted in Aluminium. This change commenced with the
introduction of the new hexagonal 3 paise coin. A twenty paise coin was
introduced in 1968 but did not gain much popularity.
Over a period, cost-benefit considerations led to the gradual
discontinuance of 1, 2 and 3 paise coins in the 1970s. Stainless steel
coinage of 10, 25 and 50 paise, was introduced in 1988 and of one rupee in
1992. The very considerable costs of managing note issues of Rs 1, Rs 2,
and Rs 5 led to the gradual coinisation of these denominations in the
1990s.

Since 1947
Since its Independence in 1947, India has faced two major financial crises
and two consequent devaluations of the rupee: In 1966 and 1991. [9]
Decimalization
A summary of the decimalization of the Rupee:[10]

Dates Currency system

1 rupee = 16 annas =64 pice (paisé – singular, "paisa") =


From 1835
192 pies (singular, "pie")

From 1 April
1 rupee = 100 nayé paisé
1957

From 1 June
1 rupee = 100 paisé
1964

The price of 16 Annas is 05 rupee in 1947. The demand for decimalisation


existed for over a century. Sri Lanka decimalized its rupee in 1869.
The Indian Coinage Act was amended in September 1955 for the adoption
of a decimal system for coinage. The Act came into force with effect from 1
April 1957. The rupee remained unchanged in value and nomenclature. It,
however, was now divided into 100 'Paisa' instead of 16 Annas or 64 Pice.
For public recognition, the new decimal Paisa was termed 'Naya Paisa'
until 1 June 1964 when the term 'Naya' was dropped. The coins of that
period also mentioned their value in terms of the rupee to avoid confusion
and cheating. For example, the one paisa coin carried the text "One-
hundredth of a Rupee" in Hindi.
1966 Economic crisis

From 1950, India ran continued trade deficits that increased in magnitude
in the 1960s. Furthermore, the Government of India had a budget deficit
problem and could not borrow money from abroad or from the private
corporate sector, due to that sector's negative savings rate. As a result, the
government issued bonds to the RBI, which increased the money supply,
leading to inflation. In 1966, foreign aid, which had hitherto been a key
factor in preventing devaluation of the rupee, was finally cut off and India
was told it had to liberalize its restrictions on trade before foreign aid would
again materialize. The response was the politically unpopular step of
devaluation accompanied by liberalization. Furthermore, The Indo-Pakistan
War of 1965 led the US and other countries friendly towards Pakistan to
withdraw foreign aid to India, which necessitated more devaluation.
Defense spending in 1965/1966 was 24.06% of total expenditure, the
highest it has been in the period from 1965 to 1989 (Foundations, pp 195).
Another factor leading to devaluation was the drought of 1965/1966 which
resulted in a sharp rise in prices.
At the end of 1969, the Indian Rupee was trading at around 13 British
pence. A decade later, by 1979, it was trading at around 6 British pence.
Finally, by the end of 1989, the Indian Rupee had plunged to an all-time low
of 3 British pence. This triggered a wave of irreversible liberalisation
reforms away from populist measures.
1991 Economic crisis

In 1991, India still had a fixed exchange system, where the rupee was
pegged to the value of a basket of currencies of major trading partners.
India started having the balance of payments problems since 1985, and by
the end of 1990, it found itself in serious economic trouble. The government
was close to default and its foreign exchange reserves had dried up to the
point that India could barely finance three weeks’ worth of imports. As in
1966, India faced high inflation and large government budget deficits. This
led the government to devalue the rupee. [11]
At the end of 1999, the Indian Rupee was devalued considerably.
Revaluation

In the period between 2000 and 2007, the Rupee stopped declining and
stabilised ranging between 1 $ = Rs 44– Rs 48. In late 2007, the Indian
Rupee reached a record high of 39 Indian national rupee per United States
dollars, on account of sustained foreign investment flows into the country.
This posed problems for major exporters, IT and BPO firms located in the
country who were incurring losses in their earnings given the appreciation
in rupee. The trend has reversed lately with the 2008 world financial crisis
as Foreign investors transferred huge sums out to their own countries.
Such appreciations were reflected in many currencies, e.g. the British
sterling pounds, which had gained value against the dollar and then has
lost value again with the recession of 2008.
2013 Depreciation

Due to stagnant reforms, and declining foreign investment, rupee started


depreciating in the early 2013.[12] Measures were announced by the
government before this drop to prevent it from dropping further, but none
managed to slow down the depreciation.[13] After continued depreciation,
and high inflation, the then Prime Minister of India, Manmohan Singh, made
a statement in the Parliament of India on the issue. He was of the view that,
the present depreciation is partly led by global factors as well as domestic
factors. He also asked the political parties to help his Government, tide
over the crisis that the country was facing with rupee losing its value. [14]
2016 Demonetisation

2016 Indian bank note demonetisation


Banknotes
Early paper issues

Notes issued by the Bank of Bengal can be categorised in the following


three series.

 Unifaced series: The early notes of the Bank of Bengal were printed
only on one side and were issued as one gold mohur and in
denominations of Rs. 100, Rs. 250, Rs. 500, etc.

 Commerce series: Later notes had a vignette representing an


allegorical female figure personifying 'commerce'. The notes were
printed on both sides. On the obverse the name of the bank and the
denominations were printed in three scripts, viz.,
(Urdu, Bengali and Devanagari). On the reverse of such notes was
printed a cartouche with ornamentation carrying the name of the Bank.

 Britannia series: By the late 19th century, the motif 'commerce' was
replaced by 'Britannia'. The new banknotes had more features to
prevent forgery.
British India issues

The Paper Currency Act of 1861 gave the Government the monopoly of
note issue throughout the vast expanse of British India, which was a
considerable task. Eventually, the management of paper currency was
entrusted to the Mint Masters, the Accountant Generals and the Controller
of Currency.

 Victoria portrait series: The first set of British India notes were the
'Victoria Portrait' series issued in denominations of Rs 10, Rs 20, Rs 50,
Rs 100 and 1,000. These were unifaced, carried two language panels.
The security features incorporated the watermark, the printed signature
and the registration of the notes.

 Underprint series: The unifaced Underprint series was introduced in


1867 as the Victoria Portrait series was withdrawn in the wake of a
spate of forgeries. These notes were issued in denominations of Rs 5,
Rs 10, Rs 20, Rs 50, Rs 100, Rs 500, Rs 1,000 and Rs 10,000.

 George V series: A series carrying the portrait of George V were


introduced in 1923, and was continued as an integral feature of all paper
money issues of British India. These notes were issued in
denominations of Rs 1, Rs 2½, Rs 5, Rs 10, Rs 50, Rs 100, Rs 1,000,
and Rs 10,000.
Reserve Bank issues during British India

The Reserve Bank of India was formally inaugurated on Monday, 1 April


1935 with its Central Office at Calcutta. Section 22 of the RBI Act, 1934,
empowered it to continue issuing Government of India notes until its own
notes were ready for issue. The bank issued the first five rupee note
bearing the portrait of George VI in 1938. This was followed by Rs. 10 in
February, Rs 100 in March and Rs 1,000 and Rs 10,000 in June 1938. The
first Reserve Bank issues were signed by the second Governor, Sir James
Taylor. In August 1940, the one-rupee note was reintroduced as a wartime
measure, as a Government note with the status of a rupee coin. During the
war, the Japanese produced high-quality forgeries of the Indian currency.
This necessitated a change in the watermark. The profile portrait of George
VI was changed to his full frontal portrait. The security thread was
introduced for the first time in India. The George VI series continued till
1947 and thereafter as a frozen series till 1950 when post-independence
notes were issued.
Republic of India issues

Following the Independence of India the Government of India brought out


the new design Re.1 note in 1949. Initially, it was felt that the King's portrait
is replaced by a portrait of Mahatma Gandhi. Finally, however, the Lion
Capital of Ashoka was chosen. The new design of notes were largely along
earlier lines. In 1953, Hindi was displayed prominently on the new notes.
The economic crisis in the late 1960s led to a reduction in the size of notes
in 1967. High denomination notes, like Rs. 10,000 notes were demonetized
in 1978.
The first "Mahatma Gandhi Series" was introduced in 1996. Prominent new
features included a changed watermark, windowed security thread, latent
image and intaglio features for the visually handicapped.
The five hundred (₹500) and one thousand rupee notes ( ₹1,000) were
demonetised by an unscheduled address to the nation by Prime Minister
Narendra Modi starting from midnight 8 November 2016. [15] These notes
are being replaced by the Mahatma Gandhi New Series of notes.
Valuation history
Exchange
rate
Year
(INR per
USD)
INR value against USD

1947 3.30 For the record, the rupee was never equal to
the dollar. At the time of independence (in
1947), India's currency was pegged to pound
1949 4.76 sterling, and the exchange rate was a shilling
and six pence for a rupee — which worked out
to Rs 13.33 to the pound.[16] The dollar-pound
1966 7.50[21] exchange rate then was $4.03 to the pound,
which in effect gave a rupee-dollar rate in 1947
of around Rs 3.30[17].[18] The pound was
1975 8.39[21] devalued in 1949, changing itllar parity from
4.03 to 2.80. India was then a part of the
sterling area, and the rupee was devalued on
1980 7.86[22] the same day by the same percentage, so that
the new dollar exchange rate in 1949 became
Rs 4.76 — which is where it stayed till the
1985 12.38[22]
rupee devaluation of 1966 made it Rs 7.50 to
the
1990 17.01[22]

1995 32.427

2000 43.50[22]

2005 (Jan) 43.47[22]

2006 (Jan) 45.19[22]

2007 (Jan) 39.42[22]

2008
48.88
(October)

2009
46.37
(October)

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