Prime Minister Narendra Modi’s announcement on November 8 to withdraw currency notes of denomination 500 and 1000 and the issue of new notes worth Rs 2000 and Rs 500 clearly left the country in a shock from which it will take a while to recover. While analysts have poured in both criticism and admiration for the government’s move, both sides do agree on the historic nature of the announcement. However, currency reforms like these are not exactly new. Since the Republic of India took birth and even before, paper currency in the subcontinent had been periodically transformed to reflect the needs of the time.
Paper currency in India came into existence with the entry of European entrepreneurs and particularly so with the establishment of financial institutions like the General Bank of Bengal and Bihar, the Bank of Hindoostan and the Bank of Bengal. Before paper currency, coinage was the normal form of currency and their nature differed from region to region within India.
Be it coinage or paper, the nature and form of the currency is a lot more than just a commodity used in exchange of goods and services. While purchasing power is definitely the foremost role played by currencies, governments have, for centuries spent a large amount of time and resources in the production of currency in a way that can best serve as the representation of regional and later national pride and interests. Historians in fact use currency as an important source for the understanding of historical processes.
Before independence, the British government issued currency notes for India. The princely states continued using individual currencies of their own, majority of which were coins. While initially the presidency banks were entrusted with the responsibility of producing paper currency across the British Indian domains, the duty was later transferred to the Mint masters, the Accountant Generals and the Controller of Currency.
The first set of notes issued by the British government were the Victoria portrait series of denominations 10, 20, 50, 100 and 1000.
In response to several cases of forgeries, the Victoria series were withdrawn in 1867 and in its place were issued currencies on moulded paper with language panels carrying languages of the regions in which they were circulated. These were called the underprint series.
The exigencies of the First World War made it necessary to issue new notes of smaller denominations. These notes were further replaced in 1923 with new notes carrying the portrait of King George V. The King’s portrait continued to be used on all notes issued by the British government in India till the country’s Independence.
The Republic of India
The birth of the Republic of India made it necessary for the newly formed government to issue currencies that can wipe out the hitherto superiority of the British empire and imprint upon monetary matters the mark of Indian freedom. Therefore the portrait of King George V was removed and symbols of independent India were printed on the new notes.
The Rupee 1 note was issued in 1949 which carried the emblem of the Lion Capital in Sarnath.
New notes were introduced in 1953 which carried texts in Hindi and had images of iconic architectural pieces in India like the Tanjore temple and the Gateway of India.
Economic constraints of the 1960s led to the issue of smaller notes. From now and later again in the early 1970s, the portrait of Mahatma Gandhi was printed on the new notes.
A new Mahatma Gandhi series notes were introduced once again in 1996 with newer security features. Gandhi continues to be printed on all notes of the Indian currency including the most recent introduction of Rs 2000 and Rs 500.
The last time old currencies were withdrawn in India was in 1978 when notes of Rs 1,000, Rs 5,000 and Rs 10,000 were removed and before that in 1946 when the British government withdrew higher denomination notes in the aftermath of the Second World War.