Q. With reference to the evolution of India’s exchange rate mechanism, consider the following events:
1.Shifting from a peg to the British Pound Sterling to a fixed currency system pegged to gold or the US Dollar.
2.Delinking the Rupee from the British Pound and determining its exchange rate with respect to a basket of world currencies.
3.Introduction of the dual exchange rate mechanism (official rate and market rate).
Which of the following represents the correct chronological order of the above events?
Answer: A
Notes:
Explanation: The correct chronological order is:
- Shifting to fixed currency (1948): Rupee, which was historically linked to the British Pound Sterling till 1948, shifted to the IMF’s fixed currency system, maintaining its value in terms of gold or the US Dollar (Rs. 3.30 = $1 was fixed in 1948).
- Basket of Currencies (September 1975): India delinked the Rupee from the British Pound and the RBI started determining its rate with respect to the exchange rate movements of the basket of world currencies.
- Dual Exchange Rate (1992-93): India moved to the floating currency regime with its own method, known as the ‘dual exchange rate,’ comprising an ‘official rate’ and a ‘market rate’.
