Rediff Logo Business Find/Feedback/Site Index
December 8, 1999


From barter to smart-cards, currency system traverses a millennium

Email this report to a friend

Rupali Karekar in Bombay

Man has been a social animal and is bound to the society in more ways than one. Among such bindings is the currency, which has kept the social fabric of the entire globe woven together.

And now, at the end of this millennium, when the world is on the path of globalisation and free trade, one looks back to find the currency has come a long way, from being a mere medium of trade to being a mental and financial support to man.

The concept of currency came down from the earlier millennium to the present society and eventually evolved in more ways than one to gain the most significant place in today's world. Music, art, science have their own place in the world but the most important is economy and what more can describe the economy of a country better than its currency?

The history behind the making of these currencies, the tinkling coins and the crisp notes, which hold the capacity to make or break a man in today's society, is interesting.

Trade existed long before the concept of currency was invented by man. It was in the form of barter system, the system of 'give and take'. Man had to part with some valuable thing of importance to get something useful for himself. To give an example, one kilo of wheat, rice, dal, jowar or bajra meant the exchange of these items with either a milk producing cow or goat or any other thing of value.

Such was the composition of the markets back then and rightly so, as each person had to sacrifice something to benefit by another way in return. But this kind of trade existed only between two needy parties and was otherwise stagnant, which made it highly unprogressive and unsafe for the society. It did not not allow man to reap benefits like long-term investment and savings for drier days. This put the ever-thinking mind of man to come up with the concept of currency.

Truly, 'necessity is the mother of invention', and when man felt the urge to find an alternative to the barter system, he came up with the idea of acquiring necessary articles and being paid in valuables for the same, which could be passed on to a third party in exchange of other articles of importance. And thus was born the coin.

The history of trade in India goes far behind to the Harappan civilisation which extended into the regions of Gujarat, Punjab and Delhi. The people there were mainly agriculturists and were using the agricultural products as media of exchange in nealy 3000 BC.

Cows were also used as media of transactions (godaan) by Vedic people where gurudakshina (fees for the teacher) was paid by presenting him with cows. The practice did not allow purchase of small items, so the nishka system was introduced.

Nishka was the most valuable ornaments of the Vedic society and hence 'the balance' was introduced and seeds were used as units of weighing.

This system proved to be tedious and a more easy way, that of hiranya (money) was invented which is used with a term mana (unit) having numerals like 12, 24, 30, 40, 70 and 100. The satamana (100 units) is found explicitly mentioned as a metallic piece round in shape, in the srauta sutras (literatures) which was apparently the beginning of the coinage in the country.

Surprisingly, although gold was used for ornaments in the Vedic period, all the coins in India in that period were of silver, probably due to the fact that gold was then cheaper in India than elsewhere in the ancient world. It was also being exported in exchange for silver, back then.

With the emergence of dynasties in the country, the round metallic structures got a well-defined face and identity and the earliest mention of the method of manufacturing silver coins is found in the 'arthashastra' (book on statecraft) written by Kautilya, a minister in the Chandragupta Maurya dynasty.

Those early silver punch-marked coins have been found in large numbers and were dound to be issued by states that existed in the country after the Mahabharata war, some of which became the part of the Magadh empire in the fourth and fifth century.

Silver coins, then, were thick, circular or oval with symbols on the obverse of the coins. Each dynasty and region in the country had its unique symbol and different weights but all had one thing in common, their reverse was left blank.

Some coins were even found to be in the shape of a long concave or otherwise, irregular. They weighed between three grains (coins of lower denomination) to 183 grains (higher denomination) and were 0.4 inches to 1.75 inches in width.

An ancient coin featuring the portrait of a king The coins had marked symbols of pulleys, animals, trees, flowers, geometric figures and other images on their persona in the earlier period but later they have five regular sumbols of sun, a six armed symbol, a wheel within a square, a rectangle or trees. Sometimes, minute symbols were also discovered on the reverse side.

The invasion of India by Greek warrior Alexander in 326 BC was a breakthrough in coinage in the country when it achieved a new dimension. The greeks settled in the northern regions of India gave a new form to Indian coins by portraying the head of the kings on the obverse sides of the coins and introducing inscriptions on them.

Figures of gods and goddesses were also introduced. Later, the Kushanas, a nomadic tribe known to Chinese as Yuch-Chi spread their kingdom upto Varanasi in the east in the 2nd century BC and the Indian Kushana coins were introduced in copper and gold by them.

The fall of the Maurya dynasty, indigenously, also cut the use of silver in making coins and the coins were now strictly made in copper, circular or rectangular in shape with the five compulsory symbols inscribed on them.

Later, the Gupta dynasty reintroduced the gold coins which were mainly inscribed by the king standing bare-bodied with his weapons and the symbols of gods and goddesses on the reverse.

Each dynasty, thus, improvised the coins in their own way and relating to their regions, be it north or south and the coins clearly display the traditional fervour of each region.

With the advent of Muslims in the country, coinage assumed entirely new pattern as the Islamic rulers started issuing coins during each and every incident of their significance. Hence coins, specifically having the ruler's name on it, were introduced on winning of wars or birth of child.

Mahmud of Ghazni brought changes in the coinage during his expeditions between 1001 and 1021 AD. Most of his coins were silver dirhams that bear the 'kalma' on the obverse.

Coin from the Mughal times Emperor Jehangir of the Mughal dynasty introduced rupee coins bearing the month and the zodiac signs on them and also minted the world's largest coins of denomination of 200, 500 and 1000 mohurs in gold.

Yet full credit of the modern-day coin goes to king Sher Shah Suri for his innovations in currency formats. He introduced the uniform rupee silver coin of standard weight and fineness in place of highly debased rounds of mixed metals, which proved to be a trend-setter.

He abolished all old currency, which in turn gave tremendous boost to trade, commerce and handicrafts. His rupee system was accepted by the British and even today in India, Pakistan, Bangladesh and Indonesia, the name rupee or rupiah or rupya is used in currency system.

The rupee came to be widely accepted as the standard coin throughout India after 1540 AD and was adopted as the official currency of India after its independence in 1947. In medieval India, the currency break-up was four paise which made one anna, 64 paise made 16 annas which in turn equalled a rupee, while in modern India, 100 paise was equal to one rupee.

During this period, visitors from the west also influenced the coins in the country and gave birth to the Portuguese Indian coinage, the Dutch-Indian coinage, the Danish Indian coinage, the French Indian coinage and the British Indian coinage which came from the traders of the respective countries.

A 100 rupee note featuring Queen Victoria's portrait After the East India Company formed the three presidencies of Madras, Calcutta and Bombay, and India was declared a British colony in 1835, the coins in the country were inscribed with the portraits of British monarchs like King William IV, Queen Victoria and King Edward V, King George V and others. In 1877, Queen Victoria assumed the title of Empress of India and coins bearing the new title were issued.

Elsewhere in the world, the paper currency had already taken root and it is believed that young traveller Marco Polo was the first person from the west to introduce the paper currency into the eastern country of China. He was ridiculed then, as the currency appearance was laughed off by the then rulers of being easily susceptible to calamities like fire and water and hence unsafe for usage. Little did they know that the painted paper would one day rule the world.

Meanwhile in India, after Independence in 1950, a new series of coins came into circulation with the Ashoka Pillar, a symbol of non-voilence, inscribed on all of them and becoming the standard feature in Indian currency. The history of paper currency is, however, of recent origin when the first currency notes were issued by the Bank of Hindustan in 1770 AD.

Private banks issued notes under different charters but the first currency issues officially by the Government of India was on August 6, 1861 of the denomination of Rs 10.

Thereafter, currency notes in the denomination of Rs 5, 10, 20, 50, 100, 500, 1,000 and 10,000 were issued upto the period of 1927.

All these notes were printed on one side with the reverse left blank. The first notes printed on both sides were of the denomination of Rs 1 and Rs 2.5 bearing the potrait of King George V in 1917. The Reserve Bank of India, established in 1935, took the sole power of issuing currency notes in 1935 and all the notes were delegated to the RBI.

The paper currency became a powerful mode of trade and economy in the modern world and gained acceptance worldwide. It became 'god' to some and a necessity , the means to survival for others.

Such was the importance of the currency notes that man chased the currency as if it were the demi-god in modern times. The paper note become synonymous with the concept of money in the modern society.

The dollar, which now rules the roost, is the father of all currencies, and all international transactions worldwide were done in this currency. The euro currency was introduced last year and is a common currency, in the European trade.

Later, counterfeit currency notes became rampant. The cheque system came into being but soon it became confined to usage during exchange of big amounts. Next, plastic currency in the form of credit, debit and smart cards came into use.

The money cards did not face problems like getting wet or torn. The card, eliminated the use of actual currency in most trades, as it could be used as a replacement for cash.

Cards are increasingly becoming popular and changing lifestyles too. They indirectly help in curbing the smuggling menace and counterfiet gangs.



The RBI's museum on currency systems


Tell us what you think of this report