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The history of the Rupee traces back to the Ancient India in circa 6th century BC. Ancient India was the earliest issuers of coins in the world, along with the Chinese wen and Lydian staters.
Contents
- Early uses
- Coinage since the British period
- Since 1947
- Decimalisation
- 1966 Economic crisis
- 1991 Economic crisis
- Revaluation
- 2013 Depreciation
- Valuation history
- Other issues
- References
The word "rūpiye" is derived from a Sanskrit word "rūpaa", which means "wrought silver, a coin of silver", in origin an adjective meaning "shapely", with a more specific meaning of "stamped, impressed", whence "coin". It is derived from the noun rūpa "shape, likeness, image". The word rūpa is being further identified as having sprung from the Dravidian.
Vedic origin is more likely compare Sanskrit rūpá, n.,m. A form, beauty (Rigveda), rūpaka adjective and n.,m. A particular coin Pañcatantra, rūpya,*rūpiya-, adj. beautiful, bearing a stamp Pāṇini., n. silver Mahabharata. There is no evidence of transmission to Indo-Aryan from Dravidian and textual evidence dates to well before any references in the later Dravidian.
Arthashastra, written by Chanakya, prime minister to the first Maurya emperor Chandragupta Maurya (c. 340–290 BCE), mentions silver coins as rupyarupa, other types including gold coins (Suvarnarupa), copper coins (Tamararupa) and lead coins (Sisarupa) are mentioned. Rupa means form or shape, example, Rupyarupa, Rupya – wrought silver, rupa – form.
Sher Shah Suri, during his five-year rule from 1540 to 1545, set up a new civic and military administration and issued a coin of silver, weighing 178 grains, which was termed the Rupiya. The silver coin remained in use during the Mughal period, Maratha era as well as in British India. Among the earliest issues of paper rupees include the Bank of Hindostan (1770–1832), the General Bank of Bengal and Bihar (1773–75, established by Warren Hastings), and the Bengal Bank (1784–91).
The Indian rupee was a silver-based currency during much of the 19th century, which had severe consequences on the standard value of the currency, as stronger economies were on the gold standard. During British rule, and the first decade of independence, the rupee was subdivided into 16 annas. Each anna was subdivided into either 4 paisas or 12 pies. So one rupee was equal to 16 annas, 64 paises of 192 pies. In 1957, decimalisation occurred and the rupee was divided into 100 naye paise (Hindi/Urdu for new paisas). After a few years, the initial "naye" was dropped.
For many years in the early and mid-20th century, the Indian rupee was the official currency in several areas that were controlled by the British and governed from India; areas such as East Africa, Southern Arabia and the Persian Gulf.
Early uses
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 rūpiya is derived from word rūpa, which means "wrought silver, a coin of silver", 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".
Arthashastra, written by Chanakya, prime minister to the first Maurya emperor Chandragupta Maurya(c. 340–290 BCE), mentions silver coins as rūpyarūpa, other types of coins including gold coins (Suvarnarūpa), copper coins (Tamrarūpa) and lead coins (Sisarūpa) are also mentioned. Rupa means form or shape, example, Rūpyarūpa, Rūpya – wrought silver, rūpa – form.
In the intermediate times there is no fixed monetary system as reported by the Da Tang Xi Yu Ji.
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. The silver coin remained in use during the Mughal period, the Maratha era (1674–1818) and in British India, as well.
Coinage since the British period
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.
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 the 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 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.
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 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 Re 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.
Decimalisation
A summary of the decimalisation of the Rupee:
The price of 16 Annas is 1 rupee in 1947. The demand for decimalisation existed for over a century. Sri Lanka decimalised 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 liberalise its restrictions on trade before foreign aid would again materialise. The response was the politically unpopular step of devaluation accompanied by liberalisation. Furthermore, The Indo-Pakistani 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 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.
At the end of 1999, the Indian Rupee was devalued considerably.
Revaluation
In the period between 2000 and 2007, the Rupee stopped declining and stabilized ranging between 1 USD = INR 44–48. In late 2007, the Indian Rupee reached a record high of Rs.39 per USD, 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 Pound, 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. Measures were announced by the government before this drop to prevent it from dropping further, but none managed to slow down the depreciation. 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.
Valuation history
The Indian Rupee and British Pound Sterling were historically exchanged based on the gold silver ratio. By 1870s the Rupee had crossed ₹9 to the Sterling and was officially pegged, via several appointed Commissions, to the Sterling from 1926 to 1966 at ₹13.33. The peg was changed to the US Dollar in 1966 at ₹7.80.