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.

Why Has the Rupee Dropped So Much Since 1947?

The rupee has dropped so much since 1947 because of the following reasons: 

1. Before 1947, or the Pre-Independence Era 

1. India's economy was governed under British colonial rules before its independence in 1947. This, of course, also applied to the Indian rupee 

1. Under the Bretton Woods system, the rupee was effectively tied to the British pound, which was in turn tied to the US dollar within a predetermined margin. As a result, the rupee was not a separate currency 

1. This implied that India has no control over its own monetary policy or exchange rate. Britain took decisions, frequently based on its own financial requirements. 

2. The Independence of India (1947) 

1. India inherited a precarious economy upon gaining independence in 1947. The country's finances were in ruins after colonial rule, a catastrophic World War, and division 

1. Indian rupee started to be valued in relation to the US dollar at that point. Given that there were no external debt or credit obligations on the national balance sheet, one INR could then be valued at one USD 

1. But the rupee's value came from its connection to the British pound, which was worth about $4. The INR ended up being about Rs.3.30 to a dollar based on that chain conversion (as well as the previous method of 1 rupee = 1 shilling 6 pence). 

3.The Post-Independence Period (1950–1990) 

1. The rupee remained stable at Rs.4.76 per dollar between 1950 and 1966. However, this stability—which was bolstered by capital controls and restricted trade exposure—was more manufactured than natural 

1. Following the Sino-Indian War in 1962, the war with Pakistan in 1965, and a severe drought in 1966, the true fissures started to appear. India's economy is under tremendous strain because of these occurrences 

1. International lenders, including the World Bank and IMF, put pressure on India to weaken the rupee in exchange for financial aid as foreign exchange reserves declined. India formally depreciated the rupee to Rs.7.50 per dollar in 1966 

1. There were even more difficulties in the 1970s. The 1971 Indo-Pakistani War and the 1973 oil crisis, which was brought on by OAPEC's oil embargo, led oil prices to soar. India, a significant oil importer with weak export revenue, was compelled to take up large foreign currency loans. As a result, the burden of external debt mounted, and the rupee's value gradually declined 

1. India saw growing budget deficits, increased inflation, and restricted international capital inflows during the 1980s. The rupee gradually lost value, falling to about Rs.17.50 per USD by 1990. 

4. Pre-21st Century Period (1990s–2000) 

1. India was in serious difficulties by the early 1990s. In 1990, the Gulf War caused oil prices to soar once more. India's foreign exchange reserves fell to dangerously low levels, hardly sufficient to fund imports for two weeks. The country's external debt was about to go into default 

1. India turned to the IMF for a rescue and promised its gold holdings to avoid collapse. It consented to an openness of its economy in exchange. This was a significant turning point in India's economic development 

1. India depreciated the currency once again in 1991 and initiated major trade liberalization, deregulation, and privatization reforms. The implementation of a dual exchange rate in 1992 and the change to a market-determined exchange rate in 1993 represented another important step 

1. This implies that global supply and demand, rather than solely governmental regulations, would suddenly affect the rupee's value. Naturally, this increased volatility and increased the rupee's susceptibility to changes in the world economy 

5. The 21st Century (2001–Present) 

1. India's economy started to grow faster in the early 2000s because to an expanding IT sector, increased exports, and foreign investments. However, because of its continued reliance on imported oil and consequent widening trade imbalance, the rupee had very little steady strength and continued to oscillate between Rs.44 and Rs.48 per USD 

1. However, momentum was not completely lost. Rising remittances, consistent capital inflows, and general macroeconomic stability all contributed to the rupee's temporary strengthening during this time 

1. The Global Financial Crisis of 2008 followed. The rupee fell precipitously once more due to the swift withdrawal of foreign institutional investors (FIIs) from Indian markets and the global decline in demand 

1. Global markets started to rebound in the ensuing years, but persistent trade and continuous current account deficits continued to put pressure on the Indian rupee 

1. Gold imports rose, global crude oil prices stayed high, and India's current account deficit grew to more than 4% of GDP 

1. India's tenacity is still remarkable. Despite ongoing obstacles including trade imbalances and geopolitical changes, India's economy is still among the fastest-growing in the world because to robust domestic demand, a digital-first strategy, and an expanding manufacturing base. 

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.