Historical Sketch

The Indian state tradition dates back to ancient times. In the 13th century, the northern parts came under Muslim influence brought in by foreign invaders from Central Asia. The Delhi Sultanate was established in 1206 and existed until another foreign invasion replaced it by the Mughal Empire, established in 1526. Portuguese navigators arrived at the Indian shores in the late 15th century. Soon after, first trading posts were established by the Dutch, the English and other European nations who all created chartered "East India" companies to organize the exploitation and the sea trade. The English East India Company was founded in 1600, its first trading post being opened in South India in 1611. Portugal, France, and Denmark did similarly, while the Dutch went on to colonize today's Sri Lanka and Indonesia.

In the 18th century, the English East India Company gradually expanded its sphere of influence. The conquered territory was administered out of the Presidencies of Bombay, Calcutta, and Madras. The Mughal suzerainty continued to exist "on paper", as well as the so-called "Princely States" outside the Company's territory, which enjoyed some degree of independence. In the mid-19th century, a series of rebellions broke out, culminating in the so-called "First Indian War of Independence" in 1857 (at that time called "Sepoy Mutiny"). Consequently, Great Britain took over the government and turned India into a crown colony. The East India Company continued its economic role for another two decades until it defaulted in the mid-1870s. The Mughal emperor was deposed in 1858, and in 1877, Queen Victoria adopted the imperial title. In the 20th century, the Indian independence movement grew stronger, and after World War II, Great Britain began to move out. In 1947, a partition of British India was implemented, creating India and Pakistan as independent states based on a split between the two dominant religions, Hinduism and Islam. The "Princely States" outside the British colony were absorbed into the new states until 1950. The French and Portuguese colonies were conquered by India until 1961, while Danish India had already disappeared in the 1830s.

Monetary History Overview

The traditional monetary system of Northern and Central India based on the silver Rupee which was standardized in the 16th century under the Mughal emperor Akbar. Silver coinage was complemented by the golden Mohur which was nominally pegged at ten Rupees, but whose rate in fact varied regionally and over time. In Southern India, the Mughal currency system competed with the golden Pagoda, that dated back to pre-Moghul times, which fluctuated around a quarter Mohur. In North West Indian Gujarat, the local standard was based on the silver Kori at about a quarter Rupee.

The English East India Company and its counterparts from other European colonial powers soon began issueing coins in their trading posts using the local coinage standards and imitating the Mughal designs to make them acceptable in trade. This led to a variation of "local Rupee standards" in the European realm alongside the many different Indian standards. The introduction of milled coinage In Bombay, Calcutta, and Madras Presidencies in the late 18th century first formalized different coinage standards, then led to their unification. In 1836, the "Company Rupee" replaced the Presidencies' standards in the British realm. French India adopted the same standard in 1871, Portuguese India followed ten years later. Most of the "Princely States" did the same, just Hayderabad and Kacch (Kutch) kept their local coinage standard until its absorption into independent India in 1950.

The Indian Rupee of 1836 was a silver currency since the Indian economy traditionally was based on this metal, rather than gold as Great Britain. In 1899 finally, the Rupee switched to the gold standard and got pegged to the Pound Sterling. The peg changed twice, in 1920 and 1927, until it reached the ratio of 13⅓ which remained for the next 40 years. Paper money issuance by commercial banks had already begun in the early 19th century under the East India Company rule. The 1861 Government Paper Currency Act abolished the private paper money and gave the government the issuance monopoly. No currency board was formed, the government's Paper Currency Department took on the charge. In April 1935, the Reserve Bank of India began operations as central bank and issued the paper money.

In 1947, India attained independence and took over monetary sovereignty. The Reserve Bank was nationalized beginning 1949, and the colonial banknotes and coins were exchanged. The Sterling peg remained unaltered and was maintained also through the 1949 devaluation of the British currency. The Rupee was decimalized in 1955 such that 100 New Paise went to the Rupee instead of 64, a counting that dated back to Mughal times. In 1966, India decreed a 36% devaluation of the currency, and the Rupee subsequently repegged to the US Dollar. The Sterling peg was reinstated in 1971, when India decided not to follow the Dollar devaluation. In 1975, the exchange rate was floated. Then followed a slow decline in value which accelerated in the mid-1980 and continued at higher rates until the early 2000s. After a decade of relative currency stability, the Rupee began depreciating again in the 2010s.

India joined the International Monetary Fund (IMF) on 27.12.1945 as a founding member (before independence).

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