The Indian rupee is the official currency of India. It is symbolized by the symbol “₹” and is abbreviated as INR. The rupee has a long history dating back to ancient India.
The word “rupee” is believed to be derived from the Sanskrit word “rupaya,” which means “coin.” In ancient India, the rupee was a silver coin that was used as a medium of exchange.
The modern Indian rupee was introduced in 1950, after India gained independence from British rule. The new rupee replaced the Indian rupee that had been used during the British colonial period. The value of the rupee was initially pegged to the British pound sterling, but it was later changed to a peg against the US dollar.
In the early years of independence, the Indian economy was heavily controlled by the government, and the rupee was not freely convertible. However, in the 1990s, the Indian government began to liberalize the economy and allow for greater foreign exchange. Today, the rupee is a fully convertible currency, and it is traded on the foreign exchange market.
Despite its long history, the rupee has faced many challenges. It has been subject to frequent devaluations and has suffered from high inflation.
The Paper Currency Act of 1861 provided the Raj a monopoly on note issuance in 1935, putting an end to the practice of private and presidential banks. However, these currencies remained in circulation until the RBI released its own coins and banknotes. Interestingly, until roughly fifty years ago, Portuguese Goa and Hyderabad used currencies other than the RBI’s. The first currency printed by the central bank in 1938 was a five-rupee note with the image of King George VI. The next denominations were 10, 100, 1,000, and 10,000 rupees.
In subsequent years, global developments, security concerns, and the high cost of producing currency led to numerous modifications to the design and composition of currency. As a wartime measure, the one-rupee note was revived in 1940. During the Japanese invasion of Burma during World War II, the watermark was made more difficult to replicate and the security thread was introduced in 1944 to combat the production of high-quality counterfeit rupees by the Japanese.
There is no consistency or regularity in the color, security features, or pattern changes. “It is ill-advised to frequently alter the design and features of a product because it causes inconvenience for customers. In order to prevent forgeries, we cannot keep it constant,” says Alpana Killawala, chief general manager of the RBI. The George VI era lasted until 1947. In 1949, a new design one-rupee coin was issued following India’s independence. King George VI’s portrait was replaced with Asoka’s Lion Capital after careful consideration, though a portrait of Mahatma Gandhi was initially considered but rejected. The Hirakud dam, a symbol of India’s industrialization, replaced the elephant on the Rs 100 banknote in 1960.
Throughout the first decade of independence, the rupee was subdivided into sixteen annas. Each anna was divided into either four or twelve portions. Introduced on January 26, 1950, the Anna Series was the first coinage of the Republic of India. Seven years later, it was replaced with the decimal system, which divided the rupee into 100 naya paise. High inflation caused a shift from silver to nickel to aluminum to steel for coinage. Similarly, the paper currency has undergone a sea change; the economic crisis of the late 1960s led to a reduction in the size of notes, and in 1978, the Rs 1,000, Rs 5,000, and Rs 10,000 were withdrawn from circulation due to fears of black money. However, the Rs 1,000 series was reintroduced in 2000 with ink that changes color when tilted. Given that the average lifespan of a currency note is two years, many paper currencies, including the Rs 1 and Rs 2 notes, have been phased out. The five-rupee note will also be eliminated.
The current coins and banknotes are all part of the 1996-introduced Mahatma Gandhi series. The banknotes include complex watermarks, a windowed security thread, a latent Gandhi image, and intaglio features for the visually impaired. In 2005-2006, additional improvements increased intaglio printing and widened the security thread.
Demonetization – 2016
One of the most significant events in the history of the Indian rupee was the demonetization of 2016. Demonetization refers to the process of withdrawing a particular currency from circulation and replacing it with a new currency. In India, demonetization refers to the decision taken by the government in 2016 to withdraw all 500 and 1,000 rupee notes from circulation and replace them with new 500 and 2,000 rupee notes.
The demonetization was announced by the Indian Prime Minister, Narendra Modi, on November 8, 2016, and it was implemented a few hours later. The decision was aimed at cracking down on black money, corruption, and counterfeiting. It was also intended to encourage the use of digital payments and reduce India’s reliance on cash.
The demonetization caused widespread disruption and chaos in India, as people rushed to exchange their old notes for new ones. There were long queues outside banks and ATMs, and many people were unable to access their money for several weeks. The demonetization also hit the informal sector of the economy, which relies heavily on cash transactions, and it led to a slowdown in economic growth.
Overall, the impact of demonetization on the Indian rupee is difficult to quantify. Some experts argue that it helped to curb black money and reduce corruption, while others argue that it caused unnecessary hardship and had limited long-term benefits.
Indian Rupee notes post demonetization
After the demonetization of the 500 and 1,000 rupee notes in 2016, new 500 and 2,000 rupee notes were introduced in India. The new notes have several security features to prevent counterfeiting, including a see-through register, a latent image, a micro letter, and a portrait watermark.
The design of the new 500 rupee note is similar to the old 500 rupee note, with the main difference being the new security features. It is predominantly pink in color and features the image of the Red Fort on the front and the year of printing on the back.
The 2,000 rupee note is a new denomination that was introduced after the demonetization. It is predominantly magenta in color and features the image of the Mangalyaan spacecraft on the front and the year of printing on the back.
In addition to the 500 and 2,000 rupee notes, India has several other denominations of rupee notes, including 100, 50, 20, 10, and 5 rupee notes. These notes also have security features to prevent counterfeiting, and their designs feature various historical and cultural landmarks of India.