The US dollar is one of the strongest currencies in the world. Most of the global trade is pegged to the dollar, since it is among the safest currencies in the world. After gaining Independence in 1947, India's economic landscape underwent significant changes, including the evolution of the Indian Rupee's relationship with the US Dollar. Initially, the Indian Rupee was pegged to the British Pound, but in 1950, a shift occurred, linking it to the US Dollar under the Bretton Woods system.
There was a time when a dollar could be bought at less than five rupees. However, one dollar in rupees in 2024 is around Rs 83.
Here's a brief history of the journey of rupee and its exchange rate against dollar.
According to Forbes, the British colonia era impacted the country's economy as well as its currency. At that time, the value of rupee was directly influence by the economic conditions in Britain.
The Great Depression of the 1930s broke the global economy and also impacted India. Since the rupee was pegged to the Pound, it was much stronger compare to the dollar. As per Forbes, one Pound was equivalent to Rs 13.37, leading to the expectation that one dollar must have been worth Rs 4.16 then.
After Independence, government intervened from time to time to manage any fluctuations in rate. During the first few decades USD to rupee exchange rate remained relatively stable. However, wars with China and Pakistan disrupted the stability of the rupee and also strained India's foreign exchange reserves.
Then came the oil crisis in the 1970s that led to inflationary pressures and increased the dollar rate. A number of adjustments and policy decisions by the Reserve Bank of India (RBI) slowly moved the rupee from a par value method to a pegged system and then to a basket peg by 1975.
The liberalisation of 1991 proved to be a crucial turning point in India's economic history and significantly impacted the rupee-dollar exchange rate.
These reforms shifted from a fixed exchange rate system to a more flexible one. The Forbes report said that the rupee was partially converted to the current account, allowing for greater flexibility in exchange rate determination. This changed the exchange rate and value of $1 was Rs 35.
By the year 2000, the dollar rate increased to Rs 45. Global events such as the Asian financial crisis and India's efforts to modernise its economy played pivotal roles in shaping the US dollar to rupee exchange rate.
In 2001, the exchange rate was 47, weakened to around Rs 75 in 2020, and fell further to about Rs 80 in 2023. A number of factors played a role in these fluctuations, such and the 2008 financial crisis and most recently, Covid-19.
