The Indian rupee (symbol: ₹; code: INR) is the official currency of India and the erstwhile British Raj. The rupee is subdivided into 100 paise (singular: paisa). The issuance of the currency is controlled by the Reserve Bank of India. The Reserve Bank derives this role from powers vested in it by the Reserve Bank of India Act, 1934. It is the world's eleventh-most-traded currency as of April 2025.
Etymology
Pāṇini (6th to 4th century BCE), the ancient Indian grammarian and logician, writes of the (). While it is unclear whether Pāṇini was referring specifically to coinage, some scholars conclude that he uses the term rūpa to mean a piece of precious metal (typically silver) used as a coin, and a rūpya to mean a stamped piece of metal, a coin in the modern sense. The Arthashastra, written by Chanakya, prime minister to the first Maurya emperor Chandragupta Maurya (), mentions silver coins as . Other types of coins, including gold coins (), copper coins (), and lead coins (), are also mentioned. The immediate precursor to the rupee is the rūpiya—the silver coin weighing 178 grains minted in northern India, first by Sher Shah Suri during his brief rule between 1540 and 1545, and later by the Mughal Empire. The weight remained unchanged well beyond the end of Mughal rule into the 20th century.
History
The history of the Indian rupee traces back to ancient India around the 6th century BCE; ancient India was one of the earliest issuers of coins in the world, alongside the Chinese wen and Lydian staters.
Arthashastra, written by Chanakya, the prime minister to the first Mauryan emperor Chandragupta Maurya (c. 340–290 BCE), mentions silver coins as rūpyarūpa, gold coins as suvarṇarūpa, copper coins as tamrarūpa, and lead coins as sīsarūpa. means 'shape' or 'form'.
The Gupta Empire under Chandragupta II produced large numbers of silver coins clearly influenced by those of the earlier Western Satraps.Allan & Stern (2008) The silver Rūpaka () coins weighed approximately 20 rattis (2.2678 g).
In the intermediate times following the Guptas, there appears to have been no fixed monetary system of coinage as reported in the travelogue Da Tang Xi Yu Ji.
During his five-year rule from 1540 to 1545, Sultan Sher Shah Suri issued a coin of silver, weighing 178 grains (or 11.53 grams), which was also termed the rupiya. During Babur's time, the brass to silver exchange ratio was roughly 50:2. The silver coin remained in use during the Mughal period, the Maratha era as well as in British India. Some of the earliest issuers of paper rupees include the Bank of Hindustan (1770–1832), the General Bank of Bengal and Bihar (1773–1775, established by Warren Hastings), and the Bengal Bank (1784–91).
1800s Indian silver rupee value (1820–1900) Year Exchange rate (pence per rupee)Melt value (pence per rupee) 185024.322.7 185124.122.7 185223.922.5 185324.122.8 185423.122.8 185524.222.8 185624.222.8 185724.622.9 185825.722.8 185926.023.0 186026.022.9 186123.922.6 186223.922.8 186323.922.8 186423.922.8 186523.822.7 186623.122.7 186723.222.5 186823.222.5 186923.322.5 187022.522.5 187123.122.5 187222.722.4 187322.322.0 187422.121.6 187521.621.1 187620.519.6 187720.820.4 187819.819.5 187920.019.0 188019.919.4 188119.919.2 188219.519.3 188319.518.7 188419.318.8 188518.218.0 188617.416.8 188716.916.6 188816.415.9 188916.515.8 189018.017.7 189116.716.7 189215.014.8 189314.513.2 189413.110.7 189513.611.1 189614.411.5 189715.310.2 189816.010.0 189916.010.2 190016.010.4
Historically, the rupee was a silver coin. This had severe consequences in the nineteenth century when the strongest economies in the world were on the gold standard (that is, paper linked to gold). The discovery of large quantities of silver in the United States and several European colonies caused the panic of 1873 which resulted in a decline in the value of silver relative to gold, devaluing India's standard currency, an event known as "the fall of the rupee". Following the panic, the world descended into a 'Long Depression', which resulted in bankruptcies, escalating unemployment, a halt in public works, and a major trade slump that lasted until 1897.W. B. Sutch, The Long Depression, 1865–1895. (1957)
India was unaffected by the imperial order-in-council of 1825, which attempted to introduce British sterling coinage to the British colonies. India, at that time, was controlled by the British East India Company. The silver rupee coin continued as the currency of India through the British Raj and beyond. In 1835, British India adopted a mono-metallic silver standard based on the rupee coin; this decision was influenced by a letter written by Lord Liverpool in 1805 extolling the virtues of mono-metallism.
Following the Sepoy Rebellion in 1857, the British government took direct control of India. From 1851, gold sovereigns were produced en masse at the Royal Mint in Sydney. In an 1864 attempt to make the British gold sovereign the "imperial coin", the treasuries in Bombay and Calcutta were instructed to receive (but not to issue) gold sovereigns; therefore, these gold sovereigns never left the vaults. As the British government gave up hope of replacing the rupee in India with the pound sterling, a conclusion was reached that it could not replace the silver dollar in the Straits Settlements with the Indian rupee (as the British East India Company had desired). Since the silver crisis of 1873, several nations switched over to a gold exchange standard (wherein silver or banknotes circulate locally but with a fixed gold value for export purposes), including India in the 1890s.
India Council Bill In 1870, India was connected to Britain by a submarine telegraph cable. Around 1875, Britain started paying India for exported goods in India Council (paper) bills (instead of silver).
If, therefore, the India Council in London should not step in to sell bills on India, the merchants and bankers would have to send silver to make good the (trade) balances. Thus a channel for the outflow of silver was stopped, in 1875, by the India Council in London.
The great importance of these (Council) Bills, however, is the effect they have on the Market Price of Silver: and they have in fact been one of the most potent factors in recent years in causing the diminution in the Value of Silver as compared to Gold.
The Indian and Chinese products for which silver is paid were and are, since 1873–74, very low in price, and it therefore takes less silver to purchase a larger quantity of Eastern commodities. Now, on taking the several agents into united consideration, it will certainly not seem very mysterious why silver should not only have fallen in price
The great nations had recourse to two expedients for replenishing their exchequers, first, loans, and, second, the more convenient forced loans of paper money۔
Fowler Committee (1898)
The Indian Currency Committee or Fowler Committee was a government committee appointed by the British-run Government of India on 29 April 1898 to examine the currency situation in India. They collected a wide range of testimony, examined as many as 49 witnesses, and only reported their conclusions in July 1899, after more than a year's deliberation. The prophecy made before the Committee of 1898 by Mr. A. M. Lindsay, in proposing a scheme closely similar in principle to that which was eventually adopted, has been largely fulfilled. "This change," he said, "will pass unnoticed, except by the intelligent few, and it is satisfactory to find that by this almost imperceptible process, the Indian currency will be placed on a footing which Ricardo and other great authorities have advocated as the best of all currency systems, viz., one in which the currency media used in the internal circulation are confined to notes and cheap token coins, which are made to act precisely as if they were bits of gold by being made convertible into gold for foreign payment purposes. The committee concurred in the opinion of the Indian government that the mints should remain closed to the unrestricted coinage of silver and that a gold standard should be adopted without delay...they recommended (1) that the British sovereign be given full legal tender power in India, and (2) that the Indian mints be thrown open to its unrestricted coinage (for gold coins only). These recommendations were acceptable to both governments and were shortly afterwards translated into laws. The act making gold a legal tender was promulgated on 15 September 1899, and preparations were soon thereafter undertaken for the coinage of gold sovereigns in the mint at Bombay.
Silver, therefore, has ceased to serve as, and standard; and the Indian currency system of to-day (that is 1901) may be described as that of a "limping" gold standard similar to the systems of France, Germany, and Holland, and the United States.
The Committee of 1898 explicitly declared themselves to be in favour of the eventual establishment of a gold currency.This goal, if it was their goal, the Government of India have never attained.
1900s
In 1913, John Maynard Keynes writes in his book Indian Currency and Finance that during the financial year 19001901, gold coins (sovereigns) worth £6,750,000 were given to the Indian people in the hope that they would circulate as currency. But against the expectation of the Government, not even half of that was returned to accounts. As this experiment failed spectacularly, the government abandoned the practice but did not abandon the narrative of the gold standard. Subsequently, much of the gold held by the Government of India was shipped to the Bank of England in 1901 and held there.
During World War II, Colonial British control over parts of Nagaland was lost to Japanese forces, the British Indian rupee was banned and the Japanese rupee (1942–44) was introduced.
In the autumn of 1917 (when the silver price rose to 55 pence), there was danger of uprisings in India (against paper currency) which would handicap seriously British participation in the war. Inconvertibility (of paper currency into silver coin) would lead to a run on Post Office Savings Banks. It would prevent the further expansion of (paper currency) note issues and cause a rise of prices, in paper currency, that would greatly increase the cost of obtaining war supplies for export; to have reduced the silver content of this historic [rupee] coin might well have caused such popular distrust of the Government as to have precipitated an internal crisis, which would have been fatal to British success in the war... and the Government could not afford to buy silver at 55 pence per ounce to coin into rupees with a bullion parity of 43.1 pence per ounce. To let silver be replaced by gold, as Mexico had done in 1906, was also impossible, for the world had no gold to spare. The Government, therefore, did the only possible thing, and raised the value of the (silver) rupee in terms of gold...
Problems caused by the gold standard
At the onset of the First World War, the cost of gold was very low and therefore the pound sterling (silver) had high value. But during the war, the value of the pound fell alarmingly due to rising war expenses. At the end of the war, the value of the pound was only a fraction of what it had been before the war. It remained low until 1925, when the then Chancellor of the Exchequer (finance minister) of the United Kingdom, Winston Churchill, restored it to pre-war levels. As a result, the price of gold fell rapidly. While the rest of Europe purchased large quantities of gold from the United Kingdom, there was little increase in her gold reserves (in United Kingdom). This dealt a blow to an already deteriorating British economy. The United Kingdom began to look to its possessions as India to compensate for the gold that was sold.Balachandran, G. (1996). John Bullion's Empire: Britain's Gold Problem and India Between the Wars. Routledge. , p. 6