INDIAN RUPEE

BYTRISHALA BHAN

OBJECTIVES

Origin and characteristics of INR

Analysis of Indian Rupee Vs

US Dollars since 2005

ORIGIN

The Indian currency Rupee has been derived from a Sanskrit word.

Ancient India was the earliest issuers of coins(6th century BC)

Over the next few centuries as empires rose and fell the coinage system reflected the dynasties,socio-political events,Gods,nature etc

Sher Shah Suri during his 5 year rule issued silver coins and called them ‘Rupaiya’.

It remained in use for Mughal,Maratha and british era.

Acute shortage of coins durin WW1 led to printing of notes.

During political unrest of 18th century agency houses developed banks which printed their own currencies.In 1858 British gained control of 100 princely states which led to the coins having images of British MonarchsAfter independence the currencies issued have been:Ashokan Pillar and Mahatama Gandhi banknotes

CHARACTERISTICS

The Govt on advice of India’s central

bank i.e. RBI

decides on

various denominations to

be issued

Coins are

minted by the Govt and RBI’s role is only to

distribute it.

Faced 2 devaluations in 1966 and 1991

Each note has

17 languag

es

Its made of cotton

and cotton

rag

Has security features

like watemar

k window, security thread

etc

Latest symbol

was adopted in 2010

EXCHANGE RATE VARIATION OF INR VS USD SINCE 2005

2005 44.01

2006 45.17

2007 41.20

2008 43.41

2009 48.32

2010 45.65

2011 46.61

2012 53.34

2013 58.52

YEAR INR/USD

YEAR

The various factors affecting the exchange rate of INR Vs USD are :

Interest Rates: Higher interest rates attract foreign capital to India which means supply of dollars.

R

B

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Do

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ile it sells

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Huge Trade Deficits: India’s import > exports which has led to trade deficit.It widened to 40,000 cr in 2013 due to ever increasing imports which further increased Dollar demand and led to its further appreciation as compared to rupee

iv.

L

o

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er

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it

a

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s:

V

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licis,restrictio

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s etc

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vi. Forex reserves: The level of forex reserves In india is expressed in Dollars.Hence when USD appreciates as compared to rupee the forex reserve declines.

vii. Relative Inflation Rate: Inflation rate and interest rates have inverse relationships.Given the slowdown in India the ‘cost push’ rather than ‘demand pull’ is increasing inflation further. This in turn is leading to appreciation of USD as compared to INR