Rupee (Indian rupee)

Rupee (Indian rupee)
Name	Indian rupee
Local name	भारतीय रुपया
Iso code	INR
Introduced	1540s (historical), modern decimalised 1957
Subunit name	paise
Subunit ratio	1/100
Issuing authority	Reserve Bank of India
Inflation target	4% (implicit)

Rupee (Indian rupee) is the official currency of the Republic of India and a central element of South Asian monetary history, trade networks, and fiscal institutions. Originating from medieval silver coinage and Mughal standards, the rupee evolved through colonial sterling linkages, postcolonial decimalisation, and contemporary reforms. The currency functions within frameworks established by the Reserve Bank of India, interacts with international markets such as New York Stock Exchange, London Stock Exchange, and Bombay Stock Exchange, and appears in treaties, agreements, and disputes involving World Bank, International Monetary Fund, and regional blocs like SAARC.

History

The rupee traces lineage to silver coinage issued under the Sultanate of Delhi, later standardized by the Mughal Empire under emperor Sher Shah Suri in the 16th century and widely circulated across trade routes connecting Calicut, Goa, Madras, and Surat. European powers—British East India Company, Dutch East India Company, and Portuguese India—encountered and adopted rupee-denominated exchanges during the Age of Discovery and the Indian Ocean trade era. Under the British Raj, the rupee was linked to the British pound sterling through the Gold Standard and later adjustments such as the 1898 Indian Coinage Act and wartime exchange controls during the First World War and Second World War. After independence in 1947, the Indian Independence Act 1947 and subsequent legislation placed monetary sovereignty with India, leading to decimalisation in 1957 and the 1950s transition influenced by advisers from institutions like the Bretton Woods Conference participants. Episodes such as the 1991 balance of payments crisis precipitated reforms under Manmohan Singh and P. V. Narasimha Rao that liberalised capital accounts and altered rupee convertibility.

Currency design and denominations

Contemporary rupee banknotes and coins reflect designs approved by the Government of India and issued by the Reserve Bank of India. Denominations include coins of 1, 2, 5, 10 rupees and banknotes of 10, 20, 50, 100, 200, 500, 2000 rupees, with historical issues such as the 1, 2, 5 rupee notes from earlier decades. Artistic motifs reference national symbols like the Lion Capital of Ashoka, architectural depictions such as the Red Fort and Sun Temple, Konark, and portraits of figures including Mahatma Gandhi used in the Mahatma Gandhi Series and the subsequent Mahatma Gandhi New Series. Commemorative coins and notes have marked events such as visits by heads of state from United States and China, anniversaries of Independence Day, and celebrations like the Asian Games. The rupee symbol "₹" was adopted following a 2010 public competition and integrates elements from Devanagari and the Latin alphabet, reflecting linguistic diversity exemplified by inscriptions in Hindi, English, and other scheduled languages recognized under the Constitution of India.

Issuance and regulation

Issuance of rupee currency is the responsibility of the Reserve Bank of India under authority delegated by the Coinage Act, 2011 and the Reserve Bank of India Act, 1934. The Ministry of Finance (India) sets fiscal parameters while the Finance Commission and institutions like the Controller General of Accounts influence budgetary implementation and currency management. Legal tenders are defined by statutes and include special arrangements for territories such as Jammu and Kashmir (before reorganization), Lakshadweep, and Andaman and Nicobar Islands. The RBI operates monetary operations through instruments like open market operations with participants including public sector banks such as State Bank of India and private sector banks like ICICI Bank and HDFC Bank, and interacts with international banking counterparts including Bank of England, Federal Reserve System, and European Central Bank on reserve and settlement matters.

Monetary policy and economy

Monetary policy affecting the rupee is determined by the Monetary Policy Committee of the Reserve Bank of India which targets price stability and growth, balancing objectives that engage actors like the Finance Ministry and multilateral lenders such as the International Monetary Fund. Policy tools include the repo rate, cash reserve ratio, and statutory liquidity ratio, with transmission mechanisms influencing sectors represented by Tata Group, Reliance Industries, Infosys, and agricultural credit extended to states like Punjab and Uttar Pradesh. Macroeconomic indicators—gross domestic product measured by Ministry of Statistics and Programme Implementation, fiscal deficit guided by the Fiscal Responsibility and Budget Management Act, inflation tracked by the Consumer Price Index (India), and trade balances reported by Directorate General of Foreign Trade—shape rupee valuation and domestic investment patterns through stock exchanges such as National Stock Exchange of India.

Exchange rates and international use

The rupee operates on a managed float against currencies like the United States dollar, Euro, British pound sterling, and regional currencies including the Pakistani rupee and Sri Lankan rupee. Historical convertibility shifts occurred after the collapse of the Bretton Woods system and during 1991 reforms that moved India toward current account convertibility. The rupee is used regionally in cross-border settlements in transactions with Nepal and Bhutan under bilateral arrangements and appears in trade with United Arab Emirates, China, and members of ASEAN. The Foreign Exchange Management Act, 1999 regulates capital flows, while institutions like the Asian Development Bank and Export-Import Bank of India facilitate financing that influences external demand for the rupee.

Counterfeiting and security measures

Counterfeiting of rupee notes has prompted technological and legal responses involving the Central Bureau of Investigation, Directorate of Revenue Intelligence, and policing agencies like Central Reserve Police Force. Security features incorporated into notes include micro-lettering, intaglio printing, watermark portraits of Mahatma Gandhi, latent images, security threads, color-shifting ink, and tactile marks for visually impaired users; these technologies are developed in collaboration with mints such as the India Government Mint at Kolkata, Mumbai, Noida, and Hyderabad and printers contracted through the Security Printing and Minting Corporation of India Limited. Legislative measures under the Indian Penal Code and the Currency and Coin Act (amendments) increase penalties for counterfeiting and illegal issuance, while public awareness campaigns coordinated with broadcasters like Prasar Bharati and publications such as The Hindu aim to reduce circulation of forged notes.

Category:Currencies of India