From a breakout Nation to a breakdown Nation by John

The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a member of BRICS. On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP (PPP) in 2012, according to the IMF. India is the 19th-largest exporter and the 10th-largest importer in the world. The economy slowed to around 5.0% for the 2012–13 fiscal year compared with 6.2% in the previous fiscal. On 28 August 2013 the Indian rupee hit an all time low of 68.80 against the US dollar. In order to control the fall in rupee, the government introduced capital controls on outward investment by both corporates and individuals. The independence-era Indian economy (from 1947 to 1991) was based on a mixed economy combining features of capitalism and socialism, resulting in an inward-looking, interventionist policies and import-substituting economy that failed to take advantage of the post-war expansion of trade. This model contributed to widespread inefficiencies and corruption, and the failings of this system were due largely to its poor implementation.  

     

Everything seems to be good  in term of number about india but it could have been a much better if , so let discuss about past  but  we should not discussion before independence , before independence india was a nation not a state while after that , india was a state as well as nation , because of sovereignty. india got independence  on 14th august 1947 , the value of rupee was almost equal to US dollar and also there was no foreign borrowing on India's balance sheet. india adopted its first five year plan in 1951 , the government started external borrowing for finance welfare and development activities , this required the devaluation of the rupee.

Year	Gross Domestic Product	US Dollar Exchange	Per Capita Income (as % of USA)
1950	100,850	4.79 Indian Rupees	3.12
1955	110,300	4.79 Indian Rupees	2.33
1960	174,070	4.77 Indian Rupees	2.88
1965	280,160	4.78 Indian Rupees	3.26
1970	462,490	7.56 Indian Rupees	2.23
1975	842,210	8.39 Indian Rupees	2.18

this figure is showing that , after independence, Indian choose to adopt a fixed rate currency regime. The rupee was pegged at 4.79 against a dollar between 1948 and 1966. but due to two consecutive wars from china in 1962 , from Pakistan in 1965 , resulted in a huge deficit on India's budget, forcing the government to devalue the currency to 7.57 against the dollar. The rupee's link with the British currency was broken in 1971 and it was linked directly to the US dollar. In 1975, the Indian rupee was linked to a basket of three currencies comprising the US dollar, the Japanese yen and the German mark. The value of the Indian rupee was pegged at 8.39 against a dollar. In 1985 it was further devalued to 12 against a dollar.

Year	Gross Domestic Product	Exports	Imports	US Dollar Exchange	Inflation Index (2000=100)	Per Capita Income (as % of USA)
1975	842,210			8.39 Indian Rupees		2.18
1980	1,380,334	90,290	135,960	7.86 Indian Rupees	18	2.08
1985	2,729,350	149,510	217,540	12.36 Indian Rupees	28	1.60
1990	5,542,706	406,350	486,980	17.50 Indian Rupees	42	1.56
1995	11,571,882	1,307,330	1,449,530	32.42 Indian Rupees	69	1.32
2000	20,791,898	2,781,260	2,975,230	44.94 Indian Rupees	100	1.26

If we see figure we can realize that import is more than exports in india after 1975 so India faced a serious balance of payment crisis in 1991 and was forced to sharply devalue its currency. The country was in the grip of high inflation, low growth and the foreign reserves were not even worth to meet three weeks of imports. Under these situation, the currency was devalued to 17.90 against a dollar. in this year the Indian economy adopted LGP. Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Since then, the overall thrust of liberalisation has remained the same, although no government has tried to take on powerful lobbies such as trade unions and farmers, on contentious issues such as reforming labour laws and reducing agricultural subsidies. By the turn of the 21st century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalisation. This has been accompanied by increases in life expectancy, literacy rates and food security, although urban residents have benefited more than agricultural residents

The year 1993 is very important in Indian currency history. It was in this year when the currency was let free to flow with the market sentiments. The exchange rate was freed to be determined by the market, with provisions of intervention by the central bank under the situation of extreme volatility. In 1993, one was required to pay Rs.31.37 to get a dollar.Rupee traded in the range of 40-50 between 2000-2010. It was mostly at around 45 against a dollar. It touched a high of 39 in 2007. The Indian currency has gradually depreciated since the global 2008 economic crisis, an all time low of 68.80 against the US dollar on august 2013.

these were some facts through which we realize the value of rupee in an international market , there are several reasons for that like CAD , poor GDP etc

CAD is considered to be the key factor behind the steep volatility of rupee against dollar. CAD occurs when the total import of goods and services of a country is greater than the total export goods and services thus making India a debtor to the rest of the world. CAD increases due to have oil and gold imports. India is among top five oil importer and also among top in gold importer.

With fall of the GDP to 4.8%, it had significant effect on the stock markets and the falling rupee. The manufacturing, mining and the agricultural sector has faltered and investors have become cautious of investing in India.