The journey of Indian rupee since 1947 and

Forecast 2015: Dollar vs. Indian Rupee conversion

In 1947 i.e., when India accomplished its independence, there were no outside
borrowings on the balance sheet of India thus the value of Indian rupee was at parity with
the US dollar. But Indian rupee went through two phase of devaluation in August 2013
India economy was hit to bottommost level. As a result of which India rupee fall below
68.75 per US dollar mark which means Indian rupee had chronicled a record low of 69
times against the past 68 years since independence in 1947. In this article, we will see
through the history of different factors resulted in the two time devaluation of Indian
rupee since Independence, current Dollar vs. Indian rupee conversion and forecast of
Dollar vs. Indian rupee conversion for 2015.

Journey of Indian rupee since independence in 1947

Though at the time independence i.e., on 15th August 1947 the exchange rate between
Indian rupee and US Dollar was equal to one (i.e., I US Dollar = 1 Indian Rupee). As
there was no outside borrowing/ loans on the balance sheet of India. But when British left
India, Indian economy was in a paralyzed and begging state thus under the resilient
leadership of then Prime Minister of India Pandit Jawahar Lal Nehru, the path of overall
development of India was developed and formulated in the form of five year plan to
address below problems:

1. Poverty
2. Foreign Trade
3. Necessity of fast industrialization
4. Increase in population
5. Growth and improvement of natural resources
6. Capital insufficiency and market limitations

Thus, the first five year plan (1951 1956) was introduced to revitalize Indian economy
and improve the standard of living of Indian people by prudent usage of natural resources
and thus the overall development of Indian and its people by who suffered during British
rgime.

For the rejuvenation of Indian economy and its people under the path of five year plan,
from 1950 Indian government continuously borrowed foreign money in the form of
outside borrowing/ loan which increased to the utmost magnitude in 1960s. Additionally,
Indian government was facing budget deficit and was in a state that it could not borrow
more additional loan from outside due to negative rate of savings. Thus, resulted in the
devaluation of Indian rupee. Up till now 1 US Dollar is equal to 4 Indian Rupee. But this
drift was worsened in 1966 by two factors: Firstly, two wars faced by India i.e., IndoChina war in 1962 and Indo-Pakistan war of 1965; and Secondly, major drought faced by
India between 1965/66 which resulted in severe rise in prices and a drastic increase in

inflation. Thus, it became mandatory for Indian government to devalue Indian rupee
majorly for the first time in 1966 to import weapons i.e., precursor of a path of
liberalization and thus opening of Indian economy for foreign trade. And, as a result of
which Indian Rupee was devalued to 1 USD = 7 INR in 1966 under the leadership of then
Prime Minister of India Mrs. Indira Gandhi.

From 1970s till 1980s, US Dollar continued to grow stronger against Indian Rupee due to
many reasons. Firstly, inability of Indian politics to inject a catalyst of robust growth in
the Indian economy due to incompetency in stabilizing cordial business relation with US
which was coupled with robust and sturdy economic development of US. As up till now
India was dependent majorly on Soviet Union for exports. Thus, when Soviet Union was
divided into 15 small nations in 1991 then Indias exports were down considerably. In
addition to that, India was dependent on West Asia for oil imports, South Africa for gold,
US for technology and South-east Asia for vegetable oil etc. And, to buy these items
global trade currency was US dollar and the only solution of earning dollars is by
exporting adequate amount of good in the world market. Till 1970s, the exchange rate
was 1 US Dollar = 7.47 INR which went up by 1 USD = 8.41 INR in 1975, after the
political instability due to assassination of then Prime Minister Mrs. Indira Gandhi in
1984. Secondly, after the assassination of Mrs. Indira Gandhi, Rajiv Gandhi was then
elected as the Prime Minister of India. But Rajiv Gandhi was failed to introduce
necessary steps for the robust development of Indian economy as well as was caught to
be involved in couple of scams (i.e., Bofors, IPKF misadventure, Shah Bano case etc).
All this trouble resulted in sinking value of Indian Rupee which recorded a new low of 1
USD = 12.34 INR in 1985 and in the 1990 it increased to 1 USD = 17.50 INR.

In 1991 when P.V Narsimha rao was elected as the Prime Minister of India, Indian
economy was in a state of gross negative. Therefore, he initiated the process of reforms in
the form of more open Indian economy (i.e., market driven economy, allowing private
sector to play major including FIIs and FDIs and reorganizing the role to be played by the
government) to accelerate the trend of economic growth & development and suppress
poverty. Thus, again Indian rupee was devalued in 1991 to 1 USD = 22.72 INR to
eradicate the problem of fiscal deficit and balance of payment (BOP) as well as to
accelerate the process of liberalization.

Therefore, though India has encountered two major economic crisis since independence
which resulted in two times devaluation of Indian rupee i.e., in 1966 and in 1991. But this
trend continues and Indian rupee is losing its value due to many external and internal
factors. And now in 2015 the exchange rate is 1 USD = 63.093 as on 15th March 2015
from xe.com.

Below is the Table showing Historical Indian Rupee Rate (INR USD)

Historical Indian Rupee Rate (INR USD)

Year INR/USD

Year INR/USD

Year INR/USD

Year INR/USD

1947
1952
1966
1973
1974
1975
1976
1977
1978
1979
1980

1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991

1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

1
4.75
7.10
7.66
8.03
8.41
8.97
8.77
8.20
8.16
7.89

8.68
9.48
10.11
11.36
12.34
12.60
12.95
13.91
16.21
17.50
22.72

22.72
28.14
31.39
32.43
35.52
36.36
41.33
43.12
45.00
47.23
48.62

46.60
45.28
44.01
45.17
41.20
43.41
48.32
45.65
46.61
53.34
58.53
61.00

Average annual currency exchange rate for the Indian Rupee (Rupees per U.S. Dollar) is
shown in this table: 1973 to present.

Source: http://www.forecast-chart.com/usd-indian-rupee.html

Forecast 2015: Dollar vs. Indian Rupee conversion

According to industry experts AV Rajwade, Indian rupee has been the second strongest
currency in the international market sitting right next to US Dollar. Even though the
Chinese currency i.e., Yuan has devalued to some extent against US Dollar, but till the
last few days, Indian rupee was lying exactly at the exchange rate when it was in during
early 2014.

In the same manner, according to the Economic Times some other industry expert is
saying that it is important to understand that the value of Indian rupee has not depreciated

but in fact that the value of Dollar has appreciated due to expectations against US that US
Federal might increase the interest rates. And, this would be first hike in interest rate by
US fed since 2006 as in 2014 the employment rate in US recorded a 15-year high and in
February 2015 the unemployment rate was 5.5% which is down from 10% recorded in
2009. Many experts says that US fed will wait until June-July of this year or early next
year to announce hike in interest rate as US fed worries about flattening recovery if there
is early announcement of hike in interest rates. On the other hand, RBI is well alert about
the fact that the Indian economy would not be able to grow without having stable Indian
rupee i.e., FIIs inflows would not stable and as per the need of Indias current
development projects. Therefore, RBI is taking all the measures in aligning with the
government to give momentum to the stable growth of the Indian economy.
The Indian economy is steadily improving with a forecast to grow at 8.5% in the next
financial year which is fastest among emerging countries, said by Raghuram Rajan, RBI
Governor. And, it has been predicted that RBI will further cut the benchmark rate by
additional 50 points to give boost to the investors moral, stabilization of Indian rupee to
accelerate growth and to target inflation.
Rajan also stated that he is very positive about budget of FY 2015 -16 and said that the
many medium term steps proposed by the government in the budget of FY 2015 16 will
undoubtedly work as a catalyst in the path of India becoming center of the worlds
financial activity.
Therefore, based on above informations about ongoing financial market trend it is
predicted that the exchange rate in 2015 would 1 USD = 62 63.50 INR.