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Indian Economy

Notes (ii) The external aspect deals with the external value of currency and the way it is regulated.
The main features of the present currency system in India are as follows:
1. Coins: The highest advances in Indian coins, mainly after independence, are as follows:
(i) The Indian rupee coin is a symbolic coin which is made by the element nickel. Till
1940, the rupee was made by silver weighing 118 grains and 11/12th fine. During
1940, two improvements took place:

(a) one rupee note was issued
(b) the silver content was reduced from 11/12 to 1/2 fineness. In 1943, two rupee
note was further added to meet the increasing request for rupees. The nickel
coin came into existence in 1947.
(ii) Earlier 1957, only old-fashioned coins used to be in flow. These coins were one
rupee, 8 annas (or half rupee), 4 annas (or quarter rupee), 2 annas, 1 anna, 1/2 anna,
1 paisa, and 1 pie. The association between these coins was as follows 1 rupee = 16
annas = 64 paise = 192 pies.
(iii) As of April 1, 1957, decimal coins system was announced in India. In this system, the
Indian rupee was classified into 100 naya paise. The terminology of naya paisa has
now been improved to simply paise. To start with old coins keep on in circulation
beside with new coins, but with effect from January 1, 1964, old coins stopped to be
legal tender. All financial records are now saved in terms of rupees and paise.
(iv) You must take into consideration that these coins are symbol coins and their face
value is greater than their fundamental (metallic) value. One rupee coin, one rupee
note and the coins of lessor denomination are delivered by the Ministry of Finance,
Government of India. The rupee and the half rupee coin are limitless legal tender,
whereas all other coins are restricted legal kind up to ` 10. Presently, the coins of the
denominations of 1, 2, 3, 5, 10, 20, 50 and 100 paise are in circulation.
2. Currency Notes: With the exemption of one-rupee notes, all other notes are delivered by
the Reserve Bank of India. The Reserve Bank of India preserves a discrete Issue Department
which agreements with delivering of the currency notes. At the present time, notes of
rupees 2, 5, 10, 50, 100 and 500, 1000 denominations are in circulation. All these notes are
convertible into each other and are limitless legal tender.
3. System of Notes Issue: The Reserve Bank had to preserve not less than 40% funds (against
note issue) in gold coins, bullion, and foreign securities with the facility that gold coins
and bullion were not at any moment to be less than ` 40 crore.
The left over 60% of the reserves were to be enclosed by rupee coins, rupee securities of
Government of India, accepted bills of exchange and promissory notes payable in India.
With the introduction of economic planning, after independence, it was felt that the
relational reserve system was not sufficiently elastic to meet the developing needs of the
country.
In the commencement of Second Five Year Plan, India had to face foreign exchange
problems. Its foreign exchange reserves fell from ` 950 crore in 1950-51 to ` 825 crore in
1955-56. Subsequently, the Reserve Bank of India Act was revised in 1956 and the relative
system of note subject was swapped by the smallest reserve system.
According to this modification, it became essential for the Issue Department of the Reserve
Bank to keep a minimum of ` 400 crore of foreign securities and ` 115 crore in gold coins
and bullion.

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