why india and america curruncy have too much diffrence
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because India is an developing country and America is a developed and United country
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Why is there a difference between the value of the currencies of two different countries?
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9 ANSWERS

Arun Mehta, cause and effect
Answered Sep 14, 2014 · Author has 202answers and 385.8k answer views
I will try to answer this in terms of INR and US $
History of the exchange rate system
For centuries, the currencies of the world were backed by gold. That is, a piece of paper currency issued by any world government represented a real amount of gold held in a vault by that government. In the 1930s, the U.S. set the value of the dollar at a single, unchanging level: 1 ounce of gold was worth $35. After World War II, other countries based the value of their currencies on the U.S. dollar. Since everyone knew how much gold a U.S. dollar was worth, then the value of any other currency against the dollar could be based on its value in gold. A currency worth twice as much gold as a U.S dollar was, therefore, also worth two U.S. dollars.
Unfortunately, the real world of economics outpaced this system. The U.S. dollar suffered from inflation (its value relative to the goods it could purchase decreased), while other currencies became more valuable and more stable. Eventually, the U.S. could no longer pretend that the dollar was worth as much as it had been, so the value was officially reduced so that 1 ounce of gold was now worth $70. The dollar's value was cut in half.
Finally, in 1971, the U.S. took away the gold standard altogether. This meant that the dollar no longer represented an actual amount of a precious substance -- market forces alone determined its value.
Source: HowStuffWorks "Currency Exchange Rate History"
Demand for Rupee has always been less
At the time of independence the value of Indian Rupee was 1 Rs = 1 $. During that time, as mentioned above, currency exchange was based on the gold standard, however most of the trading that India did was with silver (and not gold) and the value of silver was lesser than that of gold. Since silver was lesser in demand than gold, the INR was devalued in comparison to the dollar(and as a result with respect to other currencies, since they were pegged to the dollar). The forces of demand and supply have so far lead to the reduction in the value of INR.
Higher Debt
As India launched its five year plans, it needed money for investment and for that it had to borrow from foreign countries.(Because, in case the government simply printed that money the value of the rupee would still have gone down and anyways printing of currency is monitored by external agencies).
Debt does two things: first you need to pay an interest over the amount borrowed, second your credit rating (credit worthiness) goes down, thereby lowering the currency issued by you. And what is currency anyway; a 100 rupee note is a legal tender that says that the government guarantees you to give in exchange a "good" that is worth Rs 100. A government which is in debt will have a legal tender of lower credit worthiness than a legal tender of another government with lower or no debt.
The debt on India further increased through the years especially during wars with Pakistan and China,keeping strict market controls and restricting investment, providing subsidies to the poor through various programmes and inefficient allocation and utilization of capital.(I'm not completely against the use of subsidies to give benefits to poor people, however, in India this system has been inefficient and marred with corruption)
Outflows vs inflows
Essentially, the value of a currency depends upon its demand in the forex market. And when will the demand for a currency (lets say Rupee) be more ?
If more investment is made in India for activities that create value and employment in the long term.
Because these activities will require conversion of more dollars to INR, as the salaries will need to be paid in INR
If Indians invest in foreign assets and bring those returns to India, there will be a higher demand of conversion of dollar to rupee. (This is the reason, it was announced in the budget 2014-15 by the Fin Minister that foreign earnings will be taxed at a concessional rate)Budget 2014 raises income tax exemption limit. Read 6th para of this news article
If the demand for Indian goods and services increases. These goods and services will increase the demand for conversion of dollar(foreign currency) to rupee, as those manufacturing these goods or offering services will need to be paid in INR
Essentially whatever reduces our trade account deficit such as reducing dependence on imports especially for oil, coal, food and other essential items, increased inflows of capital, certainty in policy, reducing and removing trade barriers and subsidies and market controls are some of the ways the value of INR can be improved.
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9 ANSWERS

Arun Mehta, cause and effect
Answered Sep 14, 2014 · Author has 202answers and 385.8k answer views
I will try to answer this in terms of INR and US $
History of the exchange rate system
For centuries, the currencies of the world were backed by gold. That is, a piece of paper currency issued by any world government represented a real amount of gold held in a vault by that government. In the 1930s, the U.S. set the value of the dollar at a single, unchanging level: 1 ounce of gold was worth $35. After World War II, other countries based the value of their currencies on the U.S. dollar. Since everyone knew how much gold a U.S. dollar was worth, then the value of any other currency against the dollar could be based on its value in gold. A currency worth twice as much gold as a U.S dollar was, therefore, also worth two U.S. dollars.
Unfortunately, the real world of economics outpaced this system. The U.S. dollar suffered from inflation (its value relative to the goods it could purchase decreased), while other currencies became more valuable and more stable. Eventually, the U.S. could no longer pretend that the dollar was worth as much as it had been, so the value was officially reduced so that 1 ounce of gold was now worth $70. The dollar's value was cut in half.
Finally, in 1971, the U.S. took away the gold standard altogether. This meant that the dollar no longer represented an actual amount of a precious substance -- market forces alone determined its value.
Source: HowStuffWorks "Currency Exchange Rate History"
Demand for Rupee has always been less
At the time of independence the value of Indian Rupee was 1 Rs = 1 $. During that time, as mentioned above, currency exchange was based on the gold standard, however most of the trading that India did was with silver (and not gold) and the value of silver was lesser than that of gold. Since silver was lesser in demand than gold, the INR was devalued in comparison to the dollar(and as a result with respect to other currencies, since they were pegged to the dollar). The forces of demand and supply have so far lead to the reduction in the value of INR.
Higher Debt
As India launched its five year plans, it needed money for investment and for that it had to borrow from foreign countries.(Because, in case the government simply printed that money the value of the rupee would still have gone down and anyways printing of currency is monitored by external agencies).
Debt does two things: first you need to pay an interest over the amount borrowed, second your credit rating (credit worthiness) goes down, thereby lowering the currency issued by you. And what is currency anyway; a 100 rupee note is a legal tender that says that the government guarantees you to give in exchange a "good" that is worth Rs 100. A government which is in debt will have a legal tender of lower credit worthiness than a legal tender of another government with lower or no debt.
The debt on India further increased through the years especially during wars with Pakistan and China,keeping strict market controls and restricting investment, providing subsidies to the poor through various programmes and inefficient allocation and utilization of capital.(I'm not completely against the use of subsidies to give benefits to poor people, however, in India this system has been inefficient and marred with corruption)
Outflows vs inflows
Essentially, the value of a currency depends upon its demand in the forex market. And when will the demand for a currency (lets say Rupee) be more ?
If more investment is made in India for activities that create value and employment in the long term.
Because these activities will require conversion of more dollars to INR, as the salaries will need to be paid in INR
If Indians invest in foreign assets and bring those returns to India, there will be a higher demand of conversion of dollar to rupee. (This is the reason, it was announced in the budget 2014-15 by the Fin Minister that foreign earnings will be taxed at a concessional rate)Budget 2014 raises income tax exemption limit. Read 6th para of this news article
If the demand for Indian goods and services increases. These goods and services will increase the demand for conversion of dollar(foreign currency) to rupee, as those manufacturing these goods or offering services will need to be paid in INR
Essentially whatever reduces our trade account deficit such as reducing dependence on imports especially for oil, coal, food and other essential items, increased inflows of capital, certainty in policy, reducing and removing trade barriers and subsidies and market controls are some of the ways the value of INR can be improved.
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