India Rupee
Rupee – history of evolution and currency crises
This section discusses the evolution of the rupee along with the two major currency crises that were to confront the currency and related monetary policies.
History and evolution
The word “rupee” comes from the Sanskrit word “raupya” meaning Silver and traces its roots to the silver standard currency basket of the colonial rule. Originally produced in India in the 15th and 16th centuries by Mogul rulers, the currency shifted to Gold Standards in 1898 with the British dominance of the subcontinent. The currency is controlled by the Reserve Bank of India that manages the policies through its broader mandate as the acting central bank of India. Historically, the currency has been pegged to the British sterling and then to the US Dollar until 1971.
As is typical of a small economy, post-independence from the British in 1947, the Indian rupee continued to be pegged to the Sterling until it faced its first major windfall in 1966 when it was devalued and pegged to the US Dollar. This lasted until the devaluation of the Dollar in 1971 upon which the rupee was re-pegged to the Sterling. In 1972, when the British Government floated the Sterling, India decided to peg it currency to a basket of currencies used by its trading partners. Although the levels of rates were altered in this basket, essentially the government held a tight control over the fixed rate. This link was maintained until the 1991 crisis during which major policy reforms brought about a floated rupee.
Currency and Crises
Foreign exchange reserves are an important tool for a small and growing economy to enable trade and commerce and typically governments are sensitive of its foreign exchange reserves and of market causes that can lead to a reduction or heavy burden on its reserves. Preventive measures come in two forms: protectionist policies and tight monetary controls. The former is heavy legislation around imports and trade while the latter is
This section discusses the evolution of the rupee along with the two major currency crises that were to confront the currency and related monetary policies.
History and evolution
The word “rupee” comes from the Sanskrit word “raupya” meaning Silver and traces its roots to the silver standard currency basket of the colonial rule. Originally produced in India in the 15th and 16th centuries by Mogul rulers, the currency shifted to Gold Standards in 1898 with the British dominance of the subcontinent. The currency is controlled by the Reserve Bank of India that manages the policies through its broader mandate as the acting central bank of India. Historically, the currency has been pegged to the British sterling and then to the US Dollar until 1971.
As is typical of a small economy, post-independence from the British in 1947, the Indian rupee continued to be pegged to the Sterling until it faced its first major windfall in 1966 when it was devalued and pegged to the US Dollar. This lasted until the devaluation of the Dollar in 1971 upon which the rupee was re-pegged to the Sterling. In 1972, when the British Government floated the Sterling, India decided to peg it currency to a basket of currencies used by its trading partners. Although the levels of rates were altered in this basket, essentially the government held a tight control over the fixed rate. This link was maintained until the 1991 crisis during which major policy reforms brought about a floated rupee.
Currency and Crises
Foreign exchange reserves are an important tool for a small and growing economy to enable trade and commerce and typically governments are sensitive of its foreign exchange reserves and of market causes that can lead to a reduction or heavy burden on its reserves. Preventive measures come in two forms: protectionist policies and tight monetary controls. The former is heavy legislation around imports and trade while the latter is