Common Man Economics: November 2011

I was stopped by a beggar in India early this year for money. I gave him 1 rupee coin and continued walking. The bagger looked at the coin and returned back. I was surprised when heard, ‘If you want to help, give some more rupees else keep this one with you.’ I inaudibly gave him some more money and left .But, the incident triggered my thoughts. I used to get 10 paisa to buy a candy nearly 20 years back and now even a beggar is not ready to accept a rupee.

I came home worried for my one rupee coin. What happened to rupee? How it depreciated so much and why? Will it be able to gain the value back or vanish one day? I sat on the sofa looking sadly at my rupee coin. I woke up suddenly by hearing some noise. ‘Who is there’, I asked. “Hey, young man, here I am…! “ I amazingly looked at the rupee coin in my hand, “Is that you”??

“Yes, I am…! People know me as Indian Rupee…! I am the one having glorious past, doomed present and uncertain future. “

“Glorious Past?, I exclaimed. “Do you know meaning of my name? Rupee means Silver in sanskrit.”
Rupee continued, “I am almost 175 years old now. I was born in 1835. East India Company created me to have a single currency across the country. I witnessed 1857 revolt, British Raj, Famine states, Indo Bhutan, Indo Afghan War and many more. I had family members like Damdi, kani, paraka, aana, beda, pavala, artharupee etc. Each one had its own purchasing power. My purchasing power was more than a today’s five hundred rupee note. If you don’t believe do some calculations and verify”

“Then how you depreciated?” I asked.

“That’s a long story.. Since inception my value was rock-solid for almost 40 years. I was like King. Then somewhere in 1875 silver prices dropped significantly worldwide in. Most of the Industrial Nations like Germany,US,Uk adopted Classic Gold Standard. Although, my intrinsic value (amount of silver content) remained same, relative value went down. I thought if my country was independent it would have also joined Industrial Revolution as well.

“Ok. It happened in 1875.But now silver value is high, then why you not appreciated?” I asked.

“True. Silver Price shot up in 1939 during World War II and British Raj devaluated me by almost half of my value. My silver content was reduced by 50%. British started making me of 50% silver, 40% copper, 5% nickel & zinc each. Real twist came in 1947 when British Raj removed silver content completely. Nickel made Coin was named as Rupee! However my sorrow vanished same year as my own country became independent. I was fully confident that my own country will bring my King Status back and thereby will become a developed nation.”

“Unfortunately, instead of getting appreciated, I got devaluated every decade against most other currencies. And because other currencies also depreciated against their original value, today even beggars are not ready to accept me. British Raj devaluated me by half in 110 years and my own people devaluated me around 1/250 times compared to my original value in hardly 60 years…!”

“Do you know what is responsible for this, Budget deficit (Spending more earnings and printing Notes for "Deficit Amount”), Trade Deficit (More Import than export), War expenditure, Balance of Payment problems (No Money to pay for Obligation). Bad Debt, Protectionism, lack of visionary leadership, asset bubbles & many more."

"Today looking at anti-corruption movement I feel someone is at least having courage to fight against bad. But do you know why corruption is at first place? Nobody wants to be corrupt; they opt to be corrupt due to my fading future. It’s my uncertain or rather certainly diminishing value that leads to corruption. In fact people of your generation think that my lower value is better as they make more profit from outsourced jobs. I feel like value, self-esteem and confidence of my people is also de - valuated 250 times. Countries with weak currency never prosper. India would shine only if I my value is restored or appreciated considerably. “

Rupee was silent and I felt ashamed.

Below are eye opening facts that I found after some maths.