Value of 1 USD in INR Since 1947

Reasons why Indian Rupee has devalued with respect to US dollar

Given below are the reasons why the Indian rupee has depreciated with respect to the US dollar:

1. There were no unpaid credits on India's balance sheet when the country attained independence in 1947, maintaining parity between the Indian Rupee and the US Dollar.
2. The Indian Rupee was tied to the British Pound at the time of the British Raj, which India was under before becoming independent; clearly, this didn't maintain the value stable for very long.
3. As stated, one pound was worth Rs.13 from 1927 until 1966. The agreement ended in 1966, and the rupee began to depreciate.
4. In truth, the Indian Rupee was pegged to the U.S. dollar at a rate of Rs.7.5 rupees to $1 until 1971 when India launched its five-year plan after gaining independence.

Factors that have led to the depreciation of Indian Rupees with respect to the US dollar

Given below are the reasons due to which INR has depreciated with respect to USD:

1. After India attained its independence in 1947, the Indian Rupee started to be compared to the US dollar. Since there were no credits or debits on the national balance sheet, Re.1 could then be regarded as equal to $1. However, the British pound where £1 was equal to Rs.13 served as the basis for the value of Indian currency, it played a role in the depreciation of the rupee. Furthermore, this pricing of rupee versus the British pound persisted because there was no accepted method of currency comparison until 1944.
2. The value of the Indian Rupee back in 1947 was 4.76 and stayed consistent till 1966. However, since 1950, the economy of India witnessed a decline, which was due to the country’s credit standing on the global market. Apart from that, the 1962 India-China war, the subsequent India-Pakistan war in 1965, and the 1966 drought all contributed to the situation's deterioration. By 1967, all of them had changed the currency rate from $1 to Rs.7.50.
3. The value of the rupee also suffered in 1974 as its value fell to 8.10 due to the oil shock in 1973 when OAPEC or the Organisation of Arab Petroleum Exporting Countries decided to reduce proportion. India had to borrow foreign currency to deal with the situation and the ensuing political turmoil. The value of the Indian currency decreased as a result. The exchange rate declined during the 1980s, peaking at 17.50 in the 1990s, down from $1 USD to Rs.7.50 in 1967.
4. India’s economy suffered back in 1990 as the fiscal deficit decreased by 7.8% of the GDP and India was on the verge of being branded a defaulter in the Indian market. This had a significant impact on the value of the rupee. India had to make their export cheaper and import dearer.
5. The economic crisis in 1990 played a role in 1992 when the rupee devalued and the exchange rate came to S1 equal to Rs.25.92. Since then, the value of the Indian rupee has started to decline, and it is currently worth Rs.74.57. The dollar price was Rs.45.32 in 2004 and rose to Rs.62.33 over the following ten years. The highest rate of Dollar to rupee ever was recorded in February of 2016, totalling Rs.68.80.
6. The Indian rupee's value is affected by changes in the value of crude oil and other factors such as withdrawal of foreign investors and government debts. This can lead to inflation and further depreciation of the rupee. Crude oil's rise affects its value and vice-versa.

Factors that Impact Exchange Rates

Some of the factors impacting the USD to INR exchange rate are as follows:

1.  Trade Balances: The difference between a country's imports and exports, or trade balance, may affect the value of its currency. The currency can be strengthened by a trade surplus.

1. Geopolitical Events: The value of currencies and investor confidence can be impacted by international relations and political stability.

1.  Inflation: Elevated rates of inflation can erode a currency's buying power, which leads to its depreciation. Exchange rates are impacted when central banks utilise interest rates as a tool to control inflation.

1. Foreign Direct Investment (FDI): A country's currency may be impacted by how appealing it is to foreign investors. The currency may strengthen in response to higher FDI rates, but it may also weaken if the FDI rates are low.

1. Interest Rates: An economy's appeal to foreign investors increases with higher interest rates. Therefore, investors look for higher returns, which raises demand for the country's currency. Its value is strengthened by the increased demand, which makes it more valuable in relation to other currencies on the foreign exchange market.
2. Political Stability and Economic Performance: Countries with stable political environments and strong economic fundamentals tend to attract more foreign investment, boosting demand for their currency.
3. Prices of the commodities: Countries that largely rely on imports from other countries are likely to have weaker currencies. On the contrary, countries that have a lot of export business, especially for commodities like oil and coal, are likely to have stronger currencies.