The Indian Rupee has seen several ups and downs in its journey since 1947. There have been several economic and political incidents which have affected its movement in the last 66 years.
In the initial few years (1948 to 1966), India adopted the policy of fixed rate. But the ensuing years saw India in war with two great powers; China in the year 1962 and with Pakistan in the year 1965. Faced with a huge deficit, the Indian government decided to devalue the currency to 7.57 against the dollar. In the next few years, the journey of the Indian rupee was quite volatile and it was pegged against the dollar for 8.39 and 12 in 1975 and 1985 respectively.
In 1991, India faced serious payment crisis, forcing the government to devalue the currency again. There was high inflation, low growth and the foreign reserves were not enough to meet the demands of the import policy. Two years later, there was change in market situations and the currency was allowed to flow with the market. The exchange rate between the dollar and the Indian rupee was determined by the market itself. There were also provisions of intervention from the central bank, in case of extremely volatile situation.
The period between 2003 and 2007 saw a steady growth of the Indian rupee. The value stopped declining and the exchange rate was stabilized between 40 and 44. In fact, in 2007, it reached its maximum ever high of INR 39.
While this was in way good news, the appreciating rupee started creating a financial burden for BPO and IT firms and major exporters incurred heavy losses. The trend, however, faced a major reversal in 2008. Ever since, the Indian currency has seen a steady depreciation. In fact, in early 2013, the value of rupee started decreasing sharply. There were several measures by the government to stop this continued depreciation.
Some experts, however, have a different take on the currency situation.
According to them, the Rupee has not depreciated; rather the value of US dollar has appreciated over the years as it was expected that the US might increase the interest rate.
The good part is we are looking at economic growth Is the RBI helping boost this growth? Apparently yes! The RBI has decided to cut the benchmark rate with an additional 2550 basis points in October, 2016 to help investors. This will also help stabilize the Indian rupee and accelerate its growth.