The fallacy of 'dollar = rupee' in 1947
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The fallacy of 'dollar = rupee' in 1947

Last Updated: Wednesday, August 21, 2013, 12:45
 
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The fallacy of 'dollar = rupee' in 1947
DNA/Saurabh Chandra

A popular outrage to share these days on Facebook and Twitter is how the Indian rupee which was equal to 1 US dollar on 15th, August 1947 has fallen to the recent lows. An IANS news wire picked up by multiple newspapers also mentioned this very interesting 'fact'.

Interestingly Narendra Modi's speech writers also fell for the same error recently. The source of these seems to be this wikipedia article which mentions this exchange rate but does not cite any references in support of the number. The graph given next to the section starts in the 90s.

Indian rupee was pegged to the British Pound till 1966 (see footnote on page 1 of this RBI document) when it was devalued and pegged to the US Dollar. A good account of the two devaluations of 1966 and 1991 is given in this paper by Johri and Miller. The peg to the pound was at INR 13.33 to a Pound which itself was pegged to USD 4.03. That means officially speaking the USD to INR rate would be closer to Rs 4. In 1966, India changed the peg to dollar at INR 7.50. Surely, the exchange rates are not very meaningful when the currencies are fixed by governments and the unofficial rates would be usually even worse given the pressure British Pound was under post world war 2.

When I encountered this message, my main objection was that the exchange rate of a currency is not really an indication of its strength. I am sure it is nobody's contention that India of 2013 is worse off than India of 1947. What was funny about the 1 USD = 1 INR posts was that it was justified with an argument that since India had no external borrowings, its currency was at par with the dollar. If low borrowings made up for strong currencies then North Korea might have been a front runner. Ambedkar made strong arguments for not fixing exchange rates long before independence and they remain valid till date. As Ambedkar had mentioned, a stable currency is what matters rather than the absolute exchange rate.

There are much better statistics to track progress of the country since independence. We inherited a economy struggling at a growth rate of just 0.8% per annum in 1947. Life expectancy at birth has more than doubled from 32. The literacy rate has grown from 12% to 74%.

There are also enough indicators where a case can be made that we have not done as well as we should have. Point being, that we don't have to resort to fictitious numbers to argue for or against any position.

Wikipedia is known to have caused many such bloopers.

Recently a Portugese-Maratha war article on wikipedia was found to be a hoax. Even I repeated an oft-used line of Kashmir having been sold to Gulab Singh in 1846 in a previous article but noticed later when reading the actual Treaty of Amritsar that the word Kashmir is not to be found there. Kashmir is just one of the region within the boundary allocated by the British and the treaty is not particularly about Kashmir.

Over years, we have an inherent respect and trust for the written word. In the non-digital age, printing was expensive and restricted and the written word earned it's respect because of the care people invested in it before printing it. The digital age has democratised and commoditised printing. Our habits and trust still belong to the non-digital age. The only lesson to draw here is to check sources and not believe everything written on a webpage. It is easier said than done.




First Published: Wednesday, August 21, 2013, 12:43


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