The secret lives of the rupee

In which I finally understand why a great country like India has such a weak currency and why the rupee never shows up at forex bureaus

I think it’s safe to say that my children’s children will not have any money.

When I say money, I mean the kind that jingles in your purse, and the type that you fold and tuck into your pockets or arrange neatly by size in your wallet. 

I already face untold difficulties with Indian coins since they are designed to drive law-abiding citizens insane. Trying to pay an auto rickshaw in the evening darkness, you will find me frantically fingering a fistful of coins of similar shapes, hoping that the one-rupee coin I hand out is not actually five. 

The higher-value five-rupee coin, made of cupro-nickel and 23 mm wide, is inexplicably 2 mm smaller than the one-rupee coin made of ferritic stainless steel. There is no logic here, and the subtle difference in diameters is impossible to detect manually.

Unlike me, millennials and Gen Z-ers don’t carry coins and notes. Just as Mumbai’s beggars can be paid digitally through QR codes, today’s young live in a world where money is theoretical, handwriting is unnecessary and no one sees real money. The richer you are, the less real money you see.

This is why I sat up when my friend, the actor Utkarsh Mazumdar, began going on about the one-rupee note. I could not remember when I had last seen one. Has anyone seen a rupee note recently? Or was it quietly laid to rest during the demonetisation of 500 and 1,000 rupee notes?

Diving deep into the upsy-downsy story of Indian currency, I noticed an oddity. Somewhere on its design, every denomination carries a promise to pay. For example, the 20-rupee note reads: “I promise to pay the bearer the sum of twenty rupees on demand.”

This reassurance is missing only on the one-rupee note, issued by the central government and bearing the Finance Secretary’s signature. All other denominations are issued by the Reserve Bank of India (RBI) and signed by its governor.

What’s going on?

It wasn’t long before I realised how much I had taken the rupee for granted.

I had assumed that the British gave India the rupee. Wrong. It was introduced as a silver coin by an early Mughal-era emperor, Sher Shah (1486-1545), who was born Farīd Khān and established the Suri Empire, with its capital in Sasaram in Bihar.

The first paper rupee, launched by the British on November 30, 1917, was a promissory note. It could be exchanged for silver of equivalent value.

Over the next century, 125 different one-rupee notes were issued for circulation. The fundamental design was changed 28 times. Unreasonably, it was legally regarded as a coin rather than a note. The latest rupee note, released on 5 March 2015 at Srinathji Temple, Rajasthan by Rajiv Mehrishi, Finance Secretary, was made of 100 per cent cotton, measured 97 x 63 mm and was 110 microns thick. 

But it was not a promissory note.

Think about it: printed money is just paper, with no worth. You and the government tacitly agree to treat it as though it had value by calling it a promissory note.

To me, however, the promises on Indian notes sounded circular and silly. I promise to pay the bearer twenty rupees on demand on the 20-rupee note sounds like a guarantee that I could exchange one 20-rupee note for another.

Then I stumbled upon an explanation of the rupee note’s role in Indian fiscal management.

Unlike the other Indian denominations, the rupee note is India’s base currency with intrinsic value defined by the Indian Coinage Act of 1906. It doesn’t require additional promises or backing beyond the government’s direct guarantee. The other denominations, all released by the RBI, are treated as multiples of this base unit and backed by the government.

Effectively, the government promises to pay out 20 one-rupee notes in exchange for your 20-rupee note.

A more interesting question for many Indians is how many dollars they can get for their rupee. As I write this, a US dollar is worth 84.10 Indian rupees and counting. For a country that claims to be a global player and a powerhouse of everything, our currency is embarrassingly weak. Even the Thai baht is more muscular, at 33.66 to the dollar. 

No matter how sweeping a country’s claims to greatness, one look at its currency’s value will tell you the real story. If you were a tourist in a foreign land, you’d not see INR on the forex bureau’s list. 

We’re not a global currency and we’re only partially convertible. We import more than we export, and struggle with a trade deficit of $20.78 million. We’re dealing with higher inflation (5.49 per cent) than the US (2.4 per cent)—which means that you need more rupees to buy the same stuff you could buy with a dollar.

What is a fellow to do?

If you can’t play with the big boys, I recommend showing off before the little fellers. Here are some countries floundering in deeper waters than we are.

A rupee will get you 301.57 Vietnamese dong, 265.47 Laotian kip or 186.61 Indonesian rupiah. 

If those sound boring, seriously consider a vacation in sunny Paraguay, where a rupee could get you 95.22 guarani.

You could live like royalty.

You can reach C Y Gopinath at [email protected]
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The views expressed in this column are the individual’s and don’t represent those of the paper.

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