Evolution of Indian Economy

 

Lecture 4

Evolution of Indian Rupee

In Ancient times, the Sanskrit word Rupya was used to denote Silver. 

Rupya(Astadhyayi) → Rupyarupa(Arthshastra) → Rupaka(Gupta Age coin) → Rupiya(Suri Empire Coin) → Rupee(Modern Currency)

With the colonization of India, England-India trade was on rise. And to facilitate this trade various banks were established by European people.

Some of the early Banks of India

The Madras Bank(1683-1843), Chennai- 1st Bank of Modern India by European traders

Bank of Bombay(1720-1770), Bombay- established by EICo.

Bank of Hindostan(1770-1832), Calcutta-

General Bank of Bengal and Bihar(1773-1775)-

Bengal Bank(1784-1791)-

Establishing bank was the first step, but the transportation of large silver from India to England via ship was still a big problem with lots of risk between England-India trade.

To overcome this issue earliest paper currencies were issued by Bank of Hindostan, General Bank of Bengal and Bihar, Bengal Bank.

Because of frequent failure of early Banks, British Government introduced

Societies Registration Act, 1860- This Act changed unlimited liability to limited liability.

And to further strengthen the Banking systemsystem, British Government introduced

The Paper Currency Act, 1861- This Act granted monopoly to government for issuing currency.

Allahabad Bank(1865)- oldest Joint stock bank of India(1st- Bank of Upper India 1863-1913) 

RBI Act, 1934- RBI(Hq- Calcutta, from 1937 it was Mumbai) was established on 1 April 1935 as a private entity with Rs 5 Crore capital. Central Bank with provision to regulate other banks and sole issuing authority of Indian currency. 

Pre Independence Economic Situation

In Pre Independence India, the Indian economy was severely exploited by East India Company. 

1868- Dadabhai Naoroji estimated national income in his book “Poverty and Unbritish Rule” and gave the concept of Drain of Wealth.

1923- The Problem Of The Rupee: Its Origin And Its Solution by B. R. Ambedkar

1926- Hilton Young Commission(Royal Commission on Indian Currency and Finance) recommended the setting up of RBI based on B. R. Ambedkar’s suggestions 

1934- RBI Act

1 April 1935- A private central bank RBI with Rs 5 crore capital was established at Calcutta to regulate Indian Banking System.

In Pre Independence India, many of our freedom fighters were inspired by socialist countries and under the influence of USSR, planned economy was introduced in Pre Independence India. 

1928- Joseph Stalin Introduced 1st five year plan in USSR. 

1934- Sir M. Visvesvaraya published a book titled “Planned Economy in India”. He proposed the idea to double the national income in next 10 years. 

1938- National Planning Committee was established by Subhash Chandra Bose under the Chairmanship of Jawahar Lal Nehru

1944- Bombay Plan(Sir Purshottamdas Thakurdas, Mr. J.R.D. Tata + 6 others), Various Industrialists came together and drafted a joint proposal for setting up a planned economy in India. 

1944- Gandhian Plan(Sriman Nayaran, principal of Wardha Commercial College), focused on economic decentralization with primacy to rural development by developing the cottage industries.

1944- Planning and Development Department(Incharge- K. C. Neogy), under the executive Council of Viceroy was established. Later in 1946, this department was abolished. 

1945- People’s Plan by M. N. Roy for 10 year time period with chief emphasis on agricultural and consumer goods industries through collective ownership. 

Post Independence Economic Situation

After Independence of India, the periods and corresponding characteristics are mentioned below:

1947 to 2014- Planned Development(5 Years Plan) 

1950s to 1980s- Hindu Rate Of Growth, India’s low rate of economic growth(4%) for a prolonged period

1947 to 1991- License Raj(Dominated by Public sectors and private sectors were highly regulated) 

1991 onwards- Period of Liberalisation, Privatisation and Globalisation(Dominated by Private sectors specially in service sector) 

Table of Content Lecture 5