Exchange rate of USD against INR

Year USD to INR (2001-2012)

2001 47.6919
2002 48.3953
2003 45.9516
2004 44.9315
2005 44.2735
2006 45.2849
2007 40.241
2008 45.917
2009 47.4166
2010 45.5768
2011 47.9229
2012 53.2112
BAR GRAPH REPRESENTING EXCHANGE RATES OF USD TO INR FOR THE YEARS 2001 TO 2012

USD to INR (2001-2012)

60

50

40

30

20

10

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
 1. Explain incidences of Devaluation of Indian Rupee with reason and
consequences.
A. Rupee was never equal to the dollar. At the time of independence (in 1947),
India’s currency was pegged to pound sterling, and the exchange rate was a
shilling and six pence for a rupee — which worked out to Rs 13.33 to the
pound. The dollar-pound exchange rate then was $4.03 to the pound, which in
effect gave a rupee-dollar rate in 1947 of around Rs 3.30.The pound was
devalued in 1949, changing its parity from 4.03 to 2.80. India was then a part
of the sterling area, and the rupee was devalued on the same day by the same
percentage so that the new dollar exchange rate in 1949 became Rs 4.76 —
which is where it stayed till the rupee devaluation of 1966 made it Rs 7.50 to
the dollar and the pound moved to Rs 21.

Devaluation of Indian Rupee taken place 3 times since 1947. In 1947 the
exchange rate was 1 USD to 1 INR but today we have to spend 66 INR to buy a
USD. Devaluation means reduction in the external value of the domestic
currency while internal value of the domestic currency remains constant. A
country goes for devaluation of its currency to correct its adverse Balance of
Payment (BOP). If a country is experiencing an adverse Balance of Payment
(BOP) situation then it has to devalue its currency so that its export gets
cheaper and import became costlier.
2. the chronology of the Foreign Exchange System of Indian Rupee from
1947 to 2021.

A. The exchange rate of the rupee is determined largely by the market

forces of demand and supply. The Reserve Bank of India has intervened
occasionally to maintain orderly conditions and curb excessive volatility in
the foreign exchange market. Being a current account deficit country, India
is dependent on capital flows for financing the current account deficit.
Given the dependence on volatile capital flows, there may be a case for
augmenting forex reserves when the situation permits without any bias for
a particular exchange rate band

India moved to a market-determined exchange rate system in March

1993. Under the new system, the rupee’s exchange rate against other
currencies is determined largely by market demand and supply. The
Reserve Bank of India intervenes occasionally, only for maintaining orderly
conditions in the market by curbing excessive volatility.

The Indian foreign exchange market has exhibited significant growth

over the last decade, with average daily turnover recording a quantum
jump from US$6 billion a year in 2000 to US$60 billion in recent times. The
major market participants in the domestic foreign exchange market now
include banks, corporates and foreign institutional investors (FIIs). Besides
having an active over-the-counter market, India also has an exchange-
traded currency futures and options market that has shown reasonable
growth since its inception in 2008.