The Great American Dollar ($)
The official currency of the United States of America, the US Dollar ($) is an universal symbol of money and is one of the most recognized symbols worldwide. USD is the most powerful currency in the world right now and it has been so for many decades now owing to America’s economic world dominance. More than 72% of international trade involves USD at some level or the other. Currencies of almost all nations are pegged against the USD to decide their value in the global markets. Some people might challenge USD’s dominance in the future but for now it’s here to stay.
The Rupee Tales (₹)
Our own currency, the Indian National Rupee (INR) is no exception when it comes to global trade. Ever since India got its independence from the British Empire in 1947, the rupee has been on a long one-way journey of devaluation against the dollar. So how has rupee fared against the dollar in the last 70 years? Let’s take a look at it.
Base Year & Rate
Before we dive into the data, we must understand the base year and the base rate. We will consider 1947 as the base year as that is the year when India got its independence. As for the base rate there are 2 theories that go as below:
Since India was ruled by the British Empire before its independence, the INR essentially derived its value from the British Pound (£).
Exchange rates in 1947
- British Pound and Indian Rupee: £1 = ₹13
- British Pound and US Dollar: £1 = $2.73
By equating the 2 above we get, $1 = ₹4.76
So by this logic, the followers of theory 1 believe that the value of USD vs INR in 1947 was ₹4.76
Fun Fact: When the British left India in 1947, the exchange rate arrangement between pound and rupee (£1 = ₹13) was maintained until 1966. It was only after this year that the INR was in a true sense compared to the USD on a one-to-one basis.
This theory is a comparatively easy and straightforward. It assumes that as India got its independence, it was a free and new nation with no foreign debt / credit on its national balance sheet. This would essentially mean that the rupee was valued at parity (equal) with all other foreign currencies including the dollar.
So by this logic, the value of USD vs INR in 1947 was $1 = ₹1
Before 1944, there was no standard system of comparing the world currencies. A standard was established only after the Bretton Woods Agreement was passed in 1944. All the available records for USD vs INR exchange rate data follow the 1st theory as it assumes a practical scenario of existence of some form of trade between the involved nations at the time of India’s independence.
USD vs INR Exchange Rate (1947 – 2023)
So now that we understand the base year and base rate, let’s have a look at the USD vs INR exchange rate data for the last 70+ years.
For the purpose of analysis and quickly figuring out the years in which the INR was devalued the most, we’re also adding the YoY change (%) and absolute change (%).
Tip: Sort by YoY to get the years in which the INR was most devalued / appreciated.
Notes: Rate for 2020 is as of 10-Apr-20.
Source: IMF, RBI, FED, Wikipedia, World Bank