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Moneyhop
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An exchange rate (also known as conversion rate) between two currencies is the rate at which one currency can be exchanged for another. Exchange rates play an important role during a country?s level of trade, which is critical to almost every free enterprise within the world today. Therefore, exchange rates are among the foremost monitored, analyzed, and governmentally controlled economic measures. Exchange rate matters not just on the large macroeconomic scene but also on a smaller one. It impacts the real return of an investor?s portfolio, the profitability of firms, growth of specific sectors amongst various other determinants of the economy.
The Indian rupee, which was linked to British Pound, was at par with the American currency at the time of Independence in 1947. There was no foreign borrowing on India?s record. In order to finance development and welfare activities, with the introduction of the Five-Year Plan in 1951, the government started to borrow externally. This required the devaluation of the rupee. After independence, India chose to adopt a hard and fast rate currency regime. USD to INR was at 4.79 between 1948 and 1966. India faced a significant balance of payment crisis in 1991 and was forced to sharply devalue its currency. |
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