What is 'Indian Rupee - INR'

The Indian rupee (INR) is the currency of India. INR is the International Organization for Standardization currency code for the Indian rupee. The rupee is made up of 100 paisa and its currency symbol is ₹. The rupee derives its name from the rupiya, a silver coin first issued by Sultan Sher Shah Suri in the 16th century.

BREAKING DOWN 'Indian Rupee - INR'

Indian Rupees are issued as coins in denominations of 50 paisa  ₹1,  ₹2,  ₹5 and ₹10. Paper rupees are issued in denominations of ₹1, ₹2, ₹5, ₹10, ₹20, ₹50, ₹100, 200 500 and ₹2,000.  ₹1 denominations are in the Lion Capital Series, while denominations of ₹5, ₹10, ₹20, ₹100 are of the Mahatma Gandhi series, and denominations ₹50,  ₹200  ₹500, and  ₹2,000 are of the New Mahatma Gandhi series. On the reverse side of paper rupees, denominations are printed in 15 languages, while denominations are printed in Hindi and English on the front side. In 2016, the Indian Government announced the demonetization of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series, claiming it would hamstring the underground economy, making the use of illegal and counterfeit cash in funding illegal activity and terrorism much more difficult. 

In the 19th century, large increases in the quantity of silver production caused a precipitous drop in silver's value, leading to a steep decline in the rupee's value. From 1927 to 1946, the rupee was pegged to the British pound. It was then pegged to the U.S. dollar until 1975. Currently, it mostly floats on the foreign exchange market, with the Reserve Bank of India (RBI) actively trading the currency to manage its value.

Capital and Convertibility Controls

The Indian government and RBI intervene in other ways to manage the rupee's value. The rupee is subject to various capital controls and convertibility restrictions. For example, it is illegal for foreign nationals to import or export rupees, and Indian nationals may only import and export rupees in limited amounts.

The current account has no currency conversion restrictions (aside from trade barriers), an the same goes for the capital account—foreign institutional investors can bring money in and take money out of the country, converting it as they go and buy securities with it, and local firms can take capital out of the country to expand multi-nationally. The only restriction on the capital account is that households are restricted in their ability to diversify globally. However, as these accounts grow, India is moving more and more towards general convertibility. The Indian Government does not allow for the exchange of rupees for gold, due to gold's lack of liquidity.

(See also: What's the difference between the current account and the capital account?)

In 2009, the Indian government purchased $6.7 billion in gold from the IMF, which led to a further rise in the rupee.

The Rupee's Value in Modern Times

The rupee's long and steady ascent ended in 2011. Between 2011 and 2018, the currency lost almost a quarter of its value relative to the U.S. dollar. Many economists predicted that the drop in oil and commodity prices would support the rupee during 2015 because India is a major oil and commodity importer. However, the rupee continued its decline, mostly as a result of the steep decline in emerging markets economies. Investors' lack of faith in the Indian government's ability to implement market reforms was another oft-cited reason for the rupee's decline during this period.

At the 2015 World Economic Forum in Davos, Switzerland, RBI Governor Raghuram Rajan pointed to the relative strength of the rupee. Other emerging market currencies declined more relative to the U.S. dollar, while the economies and stock markets of other emerging markets experienced larger declines. The Indian rupee fell hard against the British pound and the Euro in 2013, but has recovered since, with a marked improvement against the pound 2016, and a steady recovery against the Euro since its value fell in 2013. According to livemint.com, the Rupee gained 6% in 2017, though gains in 2018 look uncertain.

RELATED TERMS
  1. PKR

    PKR is the abbreviation for the Pakistani Rupee.
  2. NPR (Nepalese Rupee)

    NPR is the currency abbreviation or currency symbol for the Nepalese ...
  3. Demonetization

    India's demonetization means that it is stripping a currency ...
  4. Hard Currency

    A hard currency is a system of money that generally comes from ...
  5. Conversion Rate

    Showing the relative value between two currencies as a ratio, ...
  6. IQD

    The currency abbreviation or currency symbol for the Iraqi Dinar ...
Related Articles
  1. Investing

    The Pros and Cons of a Fully Convertible Rupee

    A look at some of the factors involved in a fully convertible rupee as India gains economic power and broadens foreign investment collaboration.
  2. Investing

    The Top 3 Currency ETFs

    The three top performing currency ETFs in 2017.
  3. Insights

    India Takes 500 and 1000 Rupee Notes Out of Circulation to Fight `Black Money'

    Prime Minister Modi says the plan is aimed at ending the underground economy and fighting counterfeiting in a nation where 1% of the population pays taxes
  4. Investing

    Google Vs. Amazon in Indian Smart-Speaker Showdown

    Tech titans seek a foothold in India, an important market for AI-driven virtual assistants.
  5. Investing

    India's $4 iPhone (AAPL, F)

    Ringing Bells, an Indian startup, has come out with a $4 smartphone reminiscent – very reminiscent – of the iPhone. Too good to be true?
  6. Trading

    Counter-Trend Trade in Hindustan Construction

    Although Hindustan Construction shares have been crushed year to date, the reward/risk may finally be skewed in favor of the bulls.
  7. Insights

    India Is Eclipsing China's Economy As Brightest BRIC Star

    It seems fitting that on the occasion of Diwali – the Hindu “festival of lights” – India should emerge as the brightest star in the BRIC firmament.
  8. Investing

    Tech Giants Vie for India's $1T Payments Market

    Google, Facebook, Amazon and Alibaba are racing for the $1 trillion Indian payments market.
  9. Investing

    Reserve Bank of India Cuts Interest Rates

    On September 29, 2015, The Reserve Bank of India cut policy interest rates (or the repo rate) by a higher-than-expected 50 basis points, to stimulate domestic demand and to lower borrowing costs.
  10. Investing

    Amazon Signs Deal With Indian Store Chain

    Amazon’s purchase of a 5 percent stake in Shoppers Stop promises to give it much greater access to India’s fast growing ecommerce market.
RELATED FAQS
  1. What are key economic factors that can cause currency depreciation in a country?

    Read about the causes of currency devaluation, and find out how to differentiate between relative and absolute currency devaluation. Read Answer >>
  2. Is there a world currency? If so, what is it?

    There is no such thing as a world currency. However, since World War II, the dominant or reserve currency of the world has ... Read Answer >>
  3. What is a currency converter and how do I use one?

    A currency converter is a calculator that converts the value or quantity of one currency into the relative values or quantities ... Read Answer >>
Trading Center