The story of the Indian rupee since 1947

Hey folks, as you probably know, every year we have a tradition of doing a post-Independence Day special. This one’s two days late because there was a Sunday in between. But nevertheless, here it is.<br>So, in today’s Finshots, we tell you how money has evolved in India since the British left. Just a heads up though. This one’s a Finshots special and a little longer than our usual stories.<br>The Story<br>Over the last few weeks, we’ve had editions on plastic money, a UPI that may no longer be free — basically, different ways of making payments. But have you ever wondered how it all started?<br>Well, we did. And that got us digging into the history of how the Indian rupee evolved over the last eight decades. But we can’t start from August 15th, 1947 since we’ll need to give you a little context first.<br>See, today, it’s the RBI (Reserve Bank of India) that issues Indian currency, except for the one-rupee note, which is issued by the Finance Ministry. But the central bank was born only in 1935.<br>Long before that, Indian money was printed in Great Britain by a company called De La Rue. Today, you probably know it as the world’s largest banknote printing company, which designs and prints paper and polymer banknotes for over 140 countries. But that changed in 1928, when the British Indian government set up India’s first currency printing press in Nashik, Maharashtra.<br>Fun fact: Nashik was chosen because of its stable climate and proximity to a key railway network connecting it to the rest of India.<br>And yes, those notes featured King George VI, the last emperor of colonial India. But August 15th, 1947 didn’t immediately change that. Designing new notes and coins takes time, so during this transition, India continued using a frozen series of old British Indian currency.<br>Then, in 1950, as you know, India became a republic, with the government running the country on its own and the President as the head of state instead of a King or Queen. And that was also the year the Lion Capital of the Ashoka Pillar was adopted as our national emblem. So it replaced the King’s portrait on one side of the one-rupee coin. On the other side, a corn sheaf replaced the earlier Tiger. Even today, if you look at the larger one-rupee coins, you’ll see these corn sheaves on either side of the number 1 engraved on them. If you’ve ever wondered why, well, it was simply meant to signify agricultural progress and self-sufficiency.<br>But there was still something unusual about this rupee. It wasn’t divided into 100 paise like it is today. Instead, one rupee was equal to 16 annas or 192 pies. So, if your parents ever told you stories of buying bella candy (jaggery sorbet) for 4 annas, that was technically 25 paise.<br>There was just one problem with this rather odd system. These smaller units were cumbersome to deal with when businesses maintained accounts, calculated taxes, or even converted annas into foreign currency. Not that you’d do the last one every day, but you get the point. Which is why, in 1957, the new Coinage Act came into effect and divided the rupee into 100 simpler units called paise.<br>Another fun fact: Although 100 paise was easier to understand, the transition was anything but easy. Back then, even smaller units like paise and annas had real purchasing power unlike today where paise has practically disappeared from physical use and mostly survives on price tags, fuel bills and bank balances.<br>For instance, 25 paise, or 4 annas, could buy you a meal or even a movie ticket. But for reasons not clearly known, shops started pricing the same things at 26 paise after decimalisation. And you can imagine that customers weren’t thrilled because that extra 1 paisa could itself buy a packet of peanuts. This ended up in plenty of confusion and, sometimes, even fights between buyers and shopkeepers.<br>So yeah, that’s the story of how the rupee evolved over the first decade after independence. And it might sound like a pretty simple history lesson. But the truth is, it wasn’t that easy. Indian money had to go through quite a few phases over the years, some of them rather painful.<br>#1 The painful partition of money between India and Pakistan<br>If we asked you to imagine the bittersweet day of India’s independence in 1947, you’d probably think of the celebrations on one side and, on the other, the mass violence and displacement caused by Partition.<br>The money part is probably something you’d think of least. But as it turns out, that too was no less painful. Because if you remember, the RBI was created as the central bank of undivided India. So when the country was partitioned, it had to temporarily serve as the central bank for both India and Pakistan. The idea was to give Pakistan some time to build its own monetary system. So, for a while, the Indian rupee remained a common currency in both countries, which meant that the RBI had to continue managing and printing currency for Pakistan even after Partition.<br>But things...