Currency Spotlight - Indian Rupee

The Indian rupee has been used in the Indian subcontinent for generations, spanning from long before the British colonial period to the modern day.

Fast Facts: Indian Rupee

• Indian Rupee Symbol:₹
• Indian Currency Code: INR
• Coins: 50 paise, ₹1, ₹2, ₹5, ₹10
• Notes: ₹5, ₹10, ₹20, ₹50, ₹100, ₹500, ₹1000
• Indian GDP (nominal): US$2.308 trillion (7th)
• Central Bank: Reserve Bank of India

Indian Rupee History

As far as currencies go, the rupee has one of the longest-known histories, dating back to the 6th century BC. Along with Greece and China, ancient India was one of the first places to issue coins. There are various words from which the name ‘rupee’ comes from such as the Sanskrit ‘raupya’, ‘rūpyakam’, and ‘rūpya’ as well as the Hindu ‘rūpaya’. What’s most important here is that ‘rūpya’ means ‘wrought silver, a coin of silver’.

Indeed, historically the rupee was generally made of and tied to the value of silver. This would be especially relevant during the 19th century when large amounts of silver were found in the US and European colonies, resulting in a drastic fall in the value of the rupee. But we’re getting a bit ahead of ourselves. Even before the colonial era, the Maurya, Mughal, and Maratha Empire’s (stretching from the 3rd century BC to the 1800s) used various types of silver coins.

When the British instituted direct control over India in 1857, they attempted to make the pound sterling the country’s official currency. However, the British currency never left the vaults, and they soon gave up on attempting to replace the rupee.

Following the end of colonial rule in India, the rupee began to replace other regional currencies such as the Portuguese Indian escudo, which was used in and around Goa. In 1957, the rupee was decimalized (broken up into 100 paise per rupee). Since then, the rupee has been on the decline relative to the US dollar.

Indian Rupee Notes and Coins

The banknotes of the rupee have undergone several iterations since paper money was first introduced in 1861. Significantly, the portrait of the king was dropped from the bills after India gained independence from the British. Other watershed moments before the current crop of bills was the discontinuation of the ₹1 and ₹2 notes in 1995. In 1996, India replaced all banknotes with the Mahatma Gandhi series. As you might expect, the obverse of the notes features the image of Gandhi based on a photo of him with British politician Frederick Pethick-Lawrence. Other images on the bill include the seal of the Reserve Bank, Ashoka Pillar emblem, clause of guarantee (“I promise to pay the bearer a sum of” - which dates back to when notes represented material deposits), and the signature of the banks governor. In addition, each denomination is a different colour with a unique design on the reverse. These designs include the Himalayas, Indian Parliament, various native animals, and a tractor among others. In 2009, the Reserve Bank introduced 1 billion polymer ₹10 notes (like Canada) due to better security features and higher durability. The Bank has stated it plans to introduce more polymer notes on a pilot basis but isn’t fully switching over yet.

Rupee coins have a long history but the beginning of modern coinage in India can be traced to 1835 with the British East India Company. Following direct control, the coins were ‘regal’ meaning they had a portrait of the reigning monarch upon them. In 1957, the coins for a fully independent India were released. The denominations have changed over the years, in accordance with the value of the rupee. As such, the 50 paise coin is now the lowest in value, and even that is rarely seen. All coins feature the Emblem of India and the value while some coins have other designs or decals. Most of the coins are made with stainless steel though nickel or brass is also used for some.

Value: INR per USD

Prior to World War I, the INR was pegged to the GBP while essentially on par with the USD. Following this, the INR has been in decline against the USD for most of the last century. The peg has been devalued and adjusted through the years. Prior to 1966, it was essentially 4 INR per USD. In 1966, the peg was adjusted to 7.5 INR per USD. Since then, the value of the INR has rapidly gone down relative to the USD.

Over the last 10 years, the INR’s highest value was 39.125 per USD. This was recorded on November 9, 2007 and February 1, 2008. Since then, the value of the INR has steadily dropped for the most part with some appreciation here and there.

Indian Economy

The Indian economy is one of the largest and fastest growing (comparable with China) in the world. As a member of both the BRICS (up-and-coming countries in both economic and political matters) and the G-20, India is an increasingly important force on the international stage.

Between Indian independence, in 1947, and the early ’90s, the economy was largely centrally planned and interventionist. This failed to take advantage of the expansion and ultimately resulted in a poorly managed economy. After a crisis in 1991, the authorities realized they had to change their approach. Since then, the country has been an increasingly free market with openness to international trade. As a result, the economy has been progressing rapidly. There are issues however, with growth slowing around the year 2012. In addition, the low value of the rupee, high account deficit, economic inequality, and bureaucratic red tape are all challenges the country has to face going forward.

The Indian economy is roughly divided into three sectors – agriculture, industry, and services. In the agriculture sector, India is second in the world in farm output. Agriculture employed more than half the workforce in 2012, though the contribution to GDP has been on the decline – 17% in 2012. Industry on the other hand accounts for 26% of the country’s GDP – with manufacturing output the 9th or 10th (depending on how it is measured) largest in the world. Cheap labour, improved management, and modern technology are all factors in India’s high manufacturing output. Petroleum products, pharmaceuticals, engineering, precious stones, textiles, and mining are all major facets of the Indian industrial sector. ‘Services’ a term used to encompass everything from energy, infrastructure, and IT to retail and tourism accounted for 57% of India’s GDP in 2012 after expanding for the previous half-century.

Final Thoughts

Like the other BRICS (Brazil, Russia, China, and South Africa), India will continue to have an increasingly important place in global economic and political matters. While there are some serious domestic issues, India’s massive population and rapid modernization among other benefits make it well-placed going into the future.