Indian Rupee-INR

The Indian Rupee is the official currency of the Republic of India. The international code of Indian Rupee is INR and it denoted by symbol. The Reserve Bank of India, India’s federal bank is the sole authority to control the Indian rupee.

The Indian rupee is subdivided into 100 paise (singular: paisa), however the division is now theoretical as many coins less than 50 paise denominations, ceased to exist  as a legal tender from June 30, 2011. Banknotes are issued in denominations such as 5, 10, 50, 100, 500, 1000 rupees. Rupee coins are also issued, having denomination like 1, 2, 5, and 10.

The symbol  was officially adopted in 2010, which has been derived from a Devangari consonant (ra).  Devengari was an ancient language of India.  The first series of coins carrying the print of rupee symbol were introduced in 8 July, 2011.

Symbol

The new symbol is a combination of the Devanagari letter (ra) and the Latin capital letter “R” without its vertical bar (akin to the R rotunda). The two straight lines at the top (with white space between them) are said to make an allusion to the Indian flag and also exemplify an equality sign, which signifies the nation’s desire to cut the economic disparity.

While rupee coins of denominations of 1, 2, 5 and 10 with the new rupee sign have been put into circulation in 2011, banknotes of denomination 10, 100, 500 and 1000, having the new symbol were circulated in January 2012.

The Indian rupee etymology

• (tôka) in Assamese
• (taka) in Bengali
•  (tanka) in Oriya

(rupiyo) in Gujarati

• (rupaya) in Hindi
•  (rupay) in Kashmiri
• (rupayi) in Kannada, Tulu and Konkani
•  (rupaya) in Konkani

(rupa) in Malayalam

•  (rupaye) in Marathi
• (rupiya) in Nepali
• (rupia) in Punjabi
• (rupyakam) in Sanskrit
•  (rupai) in Tamil
•  (rupayi) in Telugu
• (rupiah) in Urdu

Unlike in many Indian languages where word rupee derived from “ra”, a Devanagari script , in some other  regional languages such as Assamese, Bengali and Oriya, the Indian rupee is officially known by names derived from the word (Tanka), which means “money. ”

Origin of the Symbol

Earlier on 5 March 2009, the Indian government announced a competition to create a sign for the Indian rupee.  Then in 2010 Union Budget presentation, Finance Minister Pranab Mukherjee mentioned that the future symbol should mirror and capture the Indian ethos and culture.

Following Finance Minister’s announcement, 3,331 responses were received from all across the nation.   However, only five signs, created by Nondita Correa-Mehrotra, Hitesh Padmashali, Shibin KK, Shahrukh J Irani and D Udaya Kumar, were shortlisted.

Initially, it was decided the Union Council of Ministers of India would held a meeting on 24 June 2010 to choose the final symbol. However, the decision was deferred by request of the finance minister. Then later on 15 July 2010 the Indian government finally selected the symbol created by D. Udaya Kumar.

The selection procedure was disputed under the Right to Information Act in the Delhi High Court. The petitioner, Rakesh Kumar (a contestant in the competition), argued that the process was “full of discrepancies” and “flawed”.

On 26 November 2010, the Delhi High Single-Bench Court turned down the writ petition, stating there were no reasonable grounds for the allegations. However, on 31 March 2011 the Chief Justice and Justice Sanjiv Khanna of the Delhi High Court permitted RTI activist Rakesh Kumar Singh to file Public interest litigation against the Indian rupee symbol selection procedure.

According to guideline number five of the challenge, submitted symbols were required to be “in the Indian National Language Script or a visual representation”. It has been disputed that this rule violates the Constitution of India, as it does not specify a particular language script as the Indian National Language Script. Later on April 25, 2012 the Delhi High court sent a notice to the government of India on the rupee (and other symbols) selection process.

Numeral System

The Indian numeral system is based on the decimal system, with two noteworthy dissimilarities from Western systems using long and short scales. The system is extensively employed in everyday monetary transactions in the Indian subcontinent.

For Instance, consider this amount: 3, 22,80,730.25.  In India this number will be read as “three crores, twenty-two lakhs, eighty thousand, seven hundred thirty rupees and twenty-five paise”.

The use of millions (or billions) in the Indian subcontinent is rare and the usage depends on the educational background of the speaker.

History

The first “rupee” is thought to have been introduced by Sher Shah Suri (1486–1545), which was based on a ratio of 40 copper pieces (paisa) per rupee.

Some of the other issues of paper rupees include the Bank of Hindustan (1770–1832), the General Bank of Bengal and Bihar (1773–75, established by Warren Hastings) and the Bengal Bank (1784–91). The Madras Presidency also issued a currency based on the panam, with 12 panams to the rupee until 1815.

The rupee, originally a silver coin, is said to have been derived from the Sanskrit word raupya, meaning silver.  As a result, there were severe consequences for countries like India in the nineteenth century, when the strongest economies in the world adopted the gold standard.  As huge amounts of silver was discovered in the U.S. and several European colonies, the value of silver relative to gold declined significantly. The Indian currency consequently got devalued sharply. This incident was noted as “the fall of the rupee”. This event is explained below.

Following imperial order-in-council of 1825, which envisaged introducing British sterling coinage to the British colonies, India, however, was unaffected. .British India, at that time, was administered by the British East India Company. The silver rupee continued to circulate as the currency of India through the British rule and beyond. In 1835, British India implemented a mono-metallic silver standard based on the rupee; this decision was influenced by a letter written by Lord Liverpool in 1805 praising the virtues of mono-metallism.

After the Indian Mutiny in 1857, the British government took over the direct control of British India. From 1851, gold sovereigns were made all together at the Royal Mint in Sydney,New South Wales. In  1864, in an effort  to make the British gold sovereign the “imperial coin”, the treasuries in Bombay (Mumbai)  and Calcutta (Kolkata) were ordered to receive gold sovereigns; however, these gold sovereigns never left the vaults. As the British government lost all the hope of replacing the rupee in India with the pound sterling, it realized for the same reason it could not replace the silver dollar in the Straits Settlements with the Indian rupee (as the British East India Company had desired).

Following the beginning of the silver crisis of 1873, quite a few nations adopted the gold standard; however, India continued to implement the silver standard until it was replaced by a basket of commodities and currencies in the late 20th century.

1845, the Indian rupee replaced the Danish Indian rupee,  followed by the French Indian rupee in 1954 and the Portuguese Indian escudo in 1961. After gaining the independence of British India in 1947 and the accession of the princely states  to the new Union, the Indian rupee became the de facto currency,  replacing  all the currencies of the previous -independent states (only  the Hyderabadi rupee was not demonetized until 1959).

While some of the states had issued rupees equivalent to those issued by the British (such as the Travancore rupee), other currencies (including the Hyderabadi rupee and the Kutch kori) had varied values.

Below are the values of the subdivisions of the rupee during British rule (including the first decade of independence)

• 1 rupee = 16 Anna (later 100 naye paise)
• 1 artharupee = 8 Anna, or 1/2 rupee (later 50 naye paise)
• 1 pavala = 4 Anna, or 1/4 rupee (later 25 naye paise)
• 1 beda = 2 Anna, or 1/8 rupee (later equivalent to 12.5 naye paise)
• 1 anna = 1/16 rupee (later equivalent to 6.25 naye paise)
• 1 paraka = 1/2 Anna (later equivalent to 3.125 naye paise)
• 1 kani (pice) = 1/4 Anna (later equivalent to 1.5625 naye paise)
• 1 damidi (pie) = 1/12 Anna (later equivalent to 0.520833 naye paise)

In 1957, the rupee was decimalized and subdivided into 100 naye paise (Hindi for “new paise”); in 1964, the word “naye” was dropped.

The Fall of Rupee

After its victory in the Franco-Prussian War (1870–71), Germany dug out a huge compensation and protection money from France of £200,000,000, and then moved to join Britain on a gold standard for currency.  Subsequently, France, the U.S. and other industrializing countries followed Germany in adopting a gold standard throughout the 1870s.During this period, other countries, such as Japan, which did not have the necessary access to gold or those, and countries like India, which were subject to imperial policies that determined that they did not adopt a gold standard, remained mostly on a silver standard. As a consequence, a huge divide between silver-based and gold-based economies emerged. The worst affected were those economies that adopted silver standard and traded mainly with economies with gold standard. Amid discovery of more and more silver reserves, those currencies based on gold continued to soar in value and those based on silver were falling owing to demonetization of silver. In case of India, which carried out most of its trade with gold based countries, particularly Britain, the impact of this shift was huge. As the price of silver continued to slide, the exchange value of the rupee also kept dropping, relative to pound sterling.

East African coast and South Arabia

The rupee and subsidiary coinage have also been used in East Africa, Arabia and Mesopotamia at various times. The use of the rupee in East Africa stretched from Somalia in the north to Natal in the south. While in Mozambique the British India rupees were over-stamped, in Kenya the British East Africa Company minted the rupee and its fractions.

The gain in the price of silver straight away after the First World War resulted in rupee climbing in value to two shillings sterling. In 1920 in British East Africa a florin coin was issued, bringing the currency into same level with sterling.  Soon after, the florin was divided into two East African shillings. Nevertheless, this adaptation to sterling did not happen in British India itself. In Somalia the Italian imperial power minted rupia to the equal standard, calling the paisa as besa.

Straits Settlements

The Straits Settlements were initially an outlier of the British East India Company. The Spanish dollar was widely used in the Settlements long before the British arrived during the 19th century; however, the East India Company attempted to substitute it with the rupee. This attempt was opposed by the locals; by 1867 (when the British government managed to get the direct control of the Straits Settlements from the East India Company), attempts to adopt the rupee were finally abandoned.

International use

After the partition of India (1947), the Pakistani rupee came into existence. To begin with Pakistani authorities used Indian coins and Indian currency notes by simply over-stamping with “Pakistan”. Earlier the Indian rupee was also considered as the official currency of many countries such as the Aden, Oman, Kuwait, Bahrain, Qatar, the Trucial States, Kenya, Tanganyika, Uganda, the Seychelles and Mauritius.

The Indian government introduced the Gulf rupee – also called as the Persian Gulf rupee (XPGR) – as a substitute for the Indian rupee for circulation outside the country with the Reserve Bank of India (Amendment) Act of 1 May 1959.

The introduction of a separate currency was an effort to decrease the strain on India’s foreign reserves from gold smuggling. After India undervalued the rupee on 6 June 1966, those countries still using it – Oman, Qatar, and the Trucial States (which merged to form the United Arab Emirates in 1971) – replaced the Gulf rupee with their own currencies. Kuwait and Bahrain had already introduced their own currencies in 1961 and 1965, respectively.

The Bhutanese ngultrum is pegged at par to the Indian rupee. In Bhutan both Indian rupee and Bhutanese ngultrum are legal tender.  The Nepalese rupee is pegged at 0.625 Rs; the Indian rupee is a legal tender in Nepal, however denominations of 500- and 1000-rupee banknotes are abandoned due to counterfeiting. Sri Lanka’s rupee is not pegged to India’s currency; but it is pegged to the US dollar.

Coins

East India Company, 1835

Each of the three Presidencies formed by the British East India Company (Bengal, Bombay and Madras) issued their independent coinages until 1835. All three issued rupees and fractions thereof down to ¹⁄₈– and ¹⁄₁₆-rupee in silver. Madras also printed two-rupee coins.

Copper denominations were more wide-ranging. While Bengal issued one-pie, ¹⁄₂-, one- and two-paise coins, Bombay issued 1-pie, ¹⁄₄-, ¹⁄₂-, 1-, 1¹⁄₂-, 2- and 4-paise coins. In Madras copper coins for two and four pies and one, two and four paisa, with the first two denominated as ¹⁄₂ and one dub (or ¹⁄₉₆ and ¹⁄₄₈) rupee were issued. Madras also circulated the Madras fanam until 1815.

All three Presidencies also issued gold mohurs and fractions of mohurs (including ¹⁄₁₆, ¹⁄₂, ¹⁄₄ in Bengal, ¹⁄₁₅ (a gold rupee) and ¹⁄₃ (pancia) in Bombay and ¹⁄₄, ¹⁄₃ and ¹⁄₂ in Madras.

In 1835, a uniform coinage for the EIC was introduced. It included copper ¹⁄₁₂, ¹⁄₄ and ¹⁄₂ anna, silver ¹⁄₄, ¹⁄₃ and 1 rupee and gold 1 and 2 mohurs. Subsequently, in 1841, silver 2 annas were added, followed by copper ¹⁄₂ pice in 1853. The coinage of the EIC continued to be circulated until 1862, even after the Company had been taken over by the Crown.

Regal issues, 1862–1947

In 1862, coins were introduced (also called as “regal issues”) which carried a depiction of Queen Victoria and the designation “India”. The denominations comprised of:  ¹⁄₁₂ anna, ¹⁄₂ pice, ¹⁄₄ and¹⁄₂ anna (all made out of copper), 2 annas, ¹⁄₄, ¹⁄₂ and one rupee ( made from silver), and five and ten rupees and one mohur ( made from gold). The production of gold denominations ended completely in 1891, and no ¹⁄₂-anna coins were issued after 1877.

In 1906, bronze substituted copper for the lowest three denominations; followed  by  cupro-nickel one-anna coin which  was introduced 1907. Between 1918 and 1919 cupro-nickel two-, four- and eight-annas were introduced, even though the four- and eight-annas coins were only issued until 1921 and did not replace their silver equivalents. In 1918, the Bombay mint also minted gold sovereigns and 15-rupee coins almost equal in size to the sovereigns as an emergency measure during to the First World War.

In the early 1940s, several modifications were applied. The production of ¹⁄₁₂ anna and ¹⁄₂ pice ceased , while the ¹⁄₄ anna was changed to a bronze, later,  holed coin, cupro-nickel and nickel-brass ¹⁄₂-anna coins were introduced, nickel-brass was used to make some one- and two-annas coins, and the silver proportion was reduced from 91.7 to 50 percent. The latest of the regal issues include: cupro-nickel ¹⁄₄-, ¹⁄₂– and one-rupee pieces minted between 1946 and 1947.

Independent predecimal issues, 1950–1957

After becoming a sovereign state in 1947, India issued first coins in 1950 that included 1 pice, ¹⁄₂, one and two annas, ¹⁄₄, ¹⁄₂ and one-rupee denominations. The dimensions and composition were the same as the final regal issues, except for the one-pice (which was bronze, but not holed)

Independent decimal Issues 1957 onwards

The first decimal-coin issues in India included denominations of 1, 2, 5, 10, 25 and 50 naye paise, and 1 rupee. The 1 naya paisa was made from bronze; the 2, 5 & 10 naye paise were made from cupro-nickel, and the 25 naye paise (also known as chavanni; 25 naye paise equals 4 annas), 50 naye paise (also called athanni; 50 naye paise was equivalent to 8 old annas) and 1-rupee coins were made from nickel. In 1964, the word naya(e) removed  from all coins. During the period of 1964 and 1967, aluminum one-, two-, three-, five- and ten-paise coins were introduced. In 1968, 20-paise coins made from nickel bronze were introduced, and replaced by aluminum coins in 1982.

During the period between 1972 and 1975, cupro-nickel came as replacement for nickel in the 25- and 50-paise and the 1-rupee coins; then in 1982, cupro-nickel two-rupee coins were introduced. In 1988 stainless steel 10-, 25- and 50-paise coins were introduced, followed by 1- and 5-rupee coins in 1992. Five-rupee coins, produced from brass, are being minted by India’s central bank, the Reserve Bank of India (RBI).

In the period between 2005 and 2008 new, lighter fifty-paise, one-, two- and five-rupee coins were introduced.  All of these coins were made from ferritic stainless steel. Since the face value of melted older coins was less than the scrap value, RBI was pressed to mint a new series. The circulation of the 25 paise was stopped so were other coins with nominal value less than 50.   (50 paise – also referred as  athanni – one, two, five and ten rupees, with the new rupee symbol came in circulation from 2011 onwards. Coins frequently used are one, two, five and ten rupees and although, it is still legal tender, the 50-paise (athanni) coin is rarely seen in circulation.

The following chart summarizes different coins of India having varied features

Banknotes

The central government of India approves all the designs, after receiving suggestions from the Central Board of Reserve Bank of India. At present, currencies notes are printed in five different locations which include: a Currency Note Press in Nashik, the Bank Note Press in Dewas, the Bharatiya Note Mudra Nigam (P) presses at Salboni and Mysore and at the Watermark Paper Manufacturing Mill in Hoshangabad.

The latest series of banknotes (which were first issued in 1996) is known as the Mahatma Gandhi series. Banknotes are issued in seven denominations that include: 5, 10, 20, 50, 100, 500 and 1000. Even though printing of 5 notes had stopped earlier, it was resumed in 2009. ATMs generally distribute 100, 500 and 1,000 notes. Although a zero rupee note is not an official government issue, as a symbol of protest it is printed and distributed by an NGO in India.

British India

Paper money was first introduced in 1861 by the government of India.  A 10 rupee note was issued in 1864 followed by a 5-rupee notes in 1872, 10,000-rupee notes in 1899, 100-rupee notes in 1900, 50-rupee notes in 1905, 500-rupee notes in 1907 and 1000-rupee notes in 1909.

In 1917, 1- and 2¹⁄₂-rupee notes were introduced.  In 1938, The Reserve Bank of India started banknote production, issuing 2-, 5-, 10-, 50-, 100-, 1,000- and 10,000-rupee notes even as the government continued issuing 1-rupee notes.

Banknotes Issued After Independence

India after becoming a sovereign state, introduced new designs to replace the portrait of the king. While the government of India continued issuing the 1-rupee note, the Reserve Bank issued other denominations which included the 5,000- and 10,000-rupee notes originally introduced in 1949. During the 1970s, 20- and 50-rupee notes were introduced; denominations higher than 100 rupees were taken out of circulation in 1978. Then in 1987 the 500-rupee note was introduced, followed by the 1,000-rupee note in 2000. In 1995, one- and two-rupee notes were discontinued.

In September 2009, the Reserve Bank of India decided to introduce polymer banknotes on a trial basis. The idea was to issue, 100 crore (1 billion) pieces of polymer 10 notes.

Since the polymer notes will have an average lifespan of five years it lasts four times longer than paper bank notes. Also, the officials from the Reserve Bank of India said that polymer notes are difficult to counterfeit. Polymer notes are also cleaner than paper notes.

Current Banknotes

The Reserve Bank of India issues” Mahatma Gandhi series” of banknotes. The name of the series is arrived from obverse of each note -which features a portrait of Mahatma Gandhi. After its introduction in 1996, this series has substituted all earlier issued banknotes. In 1996, The RBI introduced the series with 10 and 500 banknotes. At present, the RBI issues banknotes of all the denominations, ranging from 5 to 1,000. The printing of 5 notes (which had abandoned earlier) restarted in 2009.

As of January 2012, the new Indian rupee symbol has been included in the banknotes of denominations of 10, 100, 500 and 1,000.

Languages

Each banknote has its amount printed in 15 languages. While on the obverse side, the denomination is written in English and Hindi. On the reverse is a language pane which exhibits the denomination of the note in 15 of the 22 official languages of India. All the languages included in the pane are placed in alphabetical order.  The order of languages goes this way:  Assamese, Bengali, Gujarati, Kannada Kashmiri, Konkani, Malayalam, Marathi Nepali, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu.

Security Features

The unique security features of current banknotes are:

• Watermark – White side panel of notes includes Mahatma Gandhi watermark.
• Security thread – All notes include a silver security band with printed words (visible when held against light) of Bharat in Hindi and “RBI” in English.
• Latent image – On notes of denominations of 20 and upwards, an upright band on the right side of the Mahatma Gandhi’s image contains a latent image screening the respective denominational value in numerals (it can only be seen when the note is held horizontally at eye level).
• Microlettering – Numeral denominational value can be seen under magnifying glass between security thread and latent image.
• Intaglio – Those notes with denominations of 10 and upwards the picture of Mahatma Gandhi, the Reserve Bank seal, guarantee and promise clause, Ashoka Pillar Emblem on the left and the RBI Governor’s signature are all printed in intaglio (raised print, finger tips can feel those letters ).
• Identification mark – On the left of the watermark window, varied shapes are printed for different denominations, (20: vertical rectangle, 50: square, 100: triangle, 500: circle, 1,000: diamond). This design also helps the visually-impaired to recognize the denomination.
• Fluorescence – Number panels shine under ultraviolet light.
• Optically-variable ink – Notes of 500 and 1,000 denominations have their numerals printed in optically-variable ink. The number appears green when the note is held flat, but changes to blue when viewed at an angle.
• See-through register – Floral designs printed on the obverse and the reverse of the note overlap each other when viewed against light.
• EURion constellation – A pattern of symbols created on the banknote helps software identify the presence of a banknote in a digital image, preventing its reproduction with devices such as color photocopiers.

Convertibility

Although the Indian rupee has a market-determined exchange rate,  the RBI  intervenes very frequently  in the USD/INR currency market to stabilize effective exchange rates. Therefore, the currency regime in place for the Indian rupee with respect to the US dollar is a de facto controlled exchange rate. This is occasionally called a “managed float”. Other rates (such as the EUR/INR and INR/JPY) have the normal fluctuations typical of floating exchange rates.

Unlike China, Indian administration (both RBI, the central bank) has not followed a policy of pegging the INR to a certain foreign currency at a particular exchange rate. RBI intervention in currency markets is merely to make sure low volatility in exchange rates, and by no way the central bank tries to influence the rate (or direction) of the Indian rupee in relation to other currencies.

Another practice which plays a big part in convertibility is a series of customs regulations restricting the import and export of rupees. According to Indian Law, foreign nationals are disallowed from importing or exporting rupees; Indian nationals can import and export only up to the limit of 7,500 rupees at a time, and the possession of 500- and 1,000-rupee notes in Nepal is illegal.

RBI also uses a system of capital controls along with its policy to intervene (through active trading) in currency markets. On the current account, there are no currency-conversion limitations, discouraging buying or selling foreign exchange (although trade barriers exist). On the capital account front, foreign institutional investors have the liberty of exchange convertibility, that is, to bring money into and out of the country and purchase securities (subject to quantitative restrictions).

Local firms are allowed to take capital out of the country in order to expand in international markets. However, local households have restrictions to carry foreign exchange abroad beyond a certain point. Because of the growth of the current and capital accounts, India is gradually moving towards full de facto convertibility.

There is some uncertainty regarding the interchange of the currency with gold, but the system that India implements is that money cannot be exchanged for gold under any circumstances due to gold’s lack of liquidity and thus, money cannot be exchanged for gold by the RBI. India has adopted the same principle as Great Britain and the U.S.

Chronology

• 1991 – India started to remove restrictions on its currency. A number of reforms, removed restrictions on current account transactions (including trade, interest payments and remittances and some capital asset-based transactions). Liberalized Exchange Rate Management System (LERMS) (a dual-exchange-rate system) resulted in partial convertibility of the rupee in March 1992.
• 1997 – A panel (set up to look at capital account convertibility) suggested that India move towards full convertibility by 2000, but the schedule was abandoned in the wake of the 1997–1998 East Asian financial crises.
• 2006 – Prime Minister Manmohan Singh asked the Finance Minister and the Reserve Bank of India to set up a road map for moving towards capital account convertibility.

The Indian Rupee Performance since 1957

After its Independence in 1947, India has encountered two major financial crises and two subsequent devaluations of the rupee: In 1966 and 1991.

1966 Economic crisis

After 1950, India continued to maintain huge trade deficits that increased in magnitude in the 1960s. In addition, the Government of India had a budget deficit issue and, as a result could not borrow money from abroad or from the private corporate sector, due to that sector’s negative savings rate.

As a consequence, the government started issuing bonds to the RBI, which shoot up the money supply in the financial system, leading to inflation. In 1966, foreign aid, which was until then was a key factor in preventing devaluation of the rupee, was eventually stopped and India was told it had to liberalize its restrictions on trade before foreign aid would again materialize.

Moreover, The Indo-Pakistani War of 1965 heavily weighed on Indian rupee. The US and other countries, friendly towards Pakistan withdrew foreign aid to India, which prompted the further need for rupee devaluation.

Defense spending in 1965/1966 stood at 24.06% of total expenditure, a highest rate in the period from 1965 to 1988. The second factor which clubbed the exchange rate was the drought of 1965/1966. The sharp rise in commodity prices in this period, which eventually resulted in  devaluation, was often blamed on the drought by government.

By the end of 1969, the Indian Rupee was trading at about 13 British Pence. A decade after, by 1979, it was trading at approximately 6 British Pence. Then by the end of 1989, the Indian Rupee had fallen to an all-time low of 3 British Pence. This triggered the beginning of a wave of irreversible liberalization reforms even as India moved away from populist measures.

1991 Economic crisis

In 1991, India still continued with its fixed exchange rate system policy, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started experiencing huge balance of payments problems since 1985, and by the end of 1990, it found itself in grave economic problem. The government was on the verge of default and its foreign exchange reserves had exhausted up to the point that India could hardly finance three weeks’ worth of imports. As in 1966, India also had high inflation and alarmingly high government budget deficits. This prompted the government to devalue the rupee.

At the end of 1999, the Indian Rupee was devalued significantly.

Revaluation

Between the period of 2000–2007, the Rupee stopped to get devalued and stabilized, ranging between 1 USD = INR 44–48. In the recent past, the Indian Rupee had started to gain value and by 2007 traded about 39 Rs to 1 US dollar, on continued foreign investment flows into the country.

This created problems for major exporters and BPO firms operating in the country. However, the trend has reversed recently with the 2008 world financial crisis. As of May 2012, the Indian rupee has been the worst performer among all Asian currencies, relative to US dollar. High rate of inflation, huge budget deficits, lack of foreign direct investments due to unfavorable policies and corruption scandals have all contributed to a fall of rupee.  The Indian rupee mostly traded in the range of 56INR to a dollar in May 2012. Then it recovered a bit in June.

However, on June 18, 20012, the Indian rupee weakened further after  credit rating agency, Fitch Ratings cut India’s sovereign outlook to “negative” from “stable”, but confirmed the country at “BBB-“, the lowest investment-grade rating.

The negative rating from Fitch was followed by Standard & Poor’s outlook cut in April  2012.