A brief history of the rupee

A brief history of the rupee

News:

1. Recently, the rupee depreciated to more than 70 to a dollar led to historical comparisons to the value of the rupee.

Important facts:

2. The author discussed the brief history of the rupee:

• Britain (and France) declared war on Germany in 1939.
• As a result, India’s preparation was geared up by the colonial government towards the war effort through imposition of controls.
• Transferring money outside the sterling area required permission under rules that were laid down in London.
• By the end of the World War II, India had accumulated a sizeable sterling balance.
• The corresponding increase in rupee circulation stoked war inflation in India.
• The restrictions on capital goods imports continued because the Bank of England (BoE) had blocked what were called India’s sterling balances.
• After the war ended, the transfer of the sterling balances was negotiated between India and Britain.
• The next sterling balance negations were held in London in July 1947.
• After Aug 15, 1947, India and Pakistan would have had no forex other than the sterling balances to pay for imports.
• The Indian side,  agreed to two types of deductions from the sterling balances.

1. Towards the pensions of former British members of the ICS.
2. The value of military equipment, regardless of the condition and worth, the British forces had left behind.

• The British side gave credible warnings of an imminent sterling devaluation.
• India failed to capitalise on them.
• The sterling was floated against the major international currencies in the early 1970s, the rupee as late as 1993-1994.
• The two currencies were delinked in 1975.