Before 1948, Indian rupee was linked with British Pound Sterling.
After coming up of IMF, India shifted to the fixed currency system.
India wanted to keep rupee’s external value (i.e., exchange rate) in terms of gold or the US ($ Dollar).
In 1975 – rupee was delinked from the British Pound and the RBI started determining rupee’s exchange rate with respect to the exchange rate movements of the basket of world currencies.
In 1992-93 – India moved to floating currency regime. (with its own method of ‘dual exchange rate’)
‘Dual Exchange Rate’ – RBI may intervene in the forex market via the demand and supply of rupee or the foreign currencies.
Note: No country had followed an ideal free-floating exchange rate till date. They need some mechanism to intervene in the FOREX market because this is a highly speculative market.
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