If you take a look on the journey of Rupee against Dollar since 1947, its not possible to match 1 INR = 1 USD in next decade.
The Indian currency has witnessed a slippery journey since Independence. Many geopolitical and economic developments have affected its movement in the last 66 years.
When India got freedom on August 15, 1947, the value of the rupee was on a par with the American dollar. There were no foreign borrowings on India's balance sheet.
To finance welfare and development activities, especially with the introduction of the Five-Year Plan in 1951, the government started external borrowings. This required the devaluation of the rupee.
After independence, India had chosen to adopt a fixed rate currency regime. The rupee was pegged at 4.79 against a dollar between 1948 and 1966.
Two consecutive wars, one with China in 1962 and another one with Pakistan in 1965; resulted in a huge deficit on India's budget, forcing the government to devalue the currency to 7.57 against the dollar.
The rupee's link with the British currency was broken in 1971 and it was linked directly to the US dollar.
In 1975, value of the Indian rupee was pegged at 8.39 against a dollar.
In 1985, it was further devalued to 12 against a dollar.
In 1991, India faced a serious balance of payment crisis and was forced to sharply devalue its currency. The country was in the grip of high inflation, low growth and the foreign reserves were not even worth to meet three weeks of imports. Under these situations, the currency was devalued to 17.90 against a dollar.
1993 was very important. This year currency was let free to flow with the market sentiments. The exchange rate was freed to be determined by the market, with provisions of intervention by the central bank under the situation of extreme volatility. This year, the currency was devalued to 31.37 against a dollar. The rupee traded in the range of 40-50 between 2000 and 2010.
It was mostly at around 45 against a dollar. It touched a high of 39 in 2007.
The Indian currency has gradually depreciated since the global 2008 economic crisis.
No comments:
Post a Comment