The Liberalised Exchange Rate Management System was put in place in March 1992. This involved an interim dual exchange rate system being put in place.

Essentially, it meant that India worked with two exchange rates — one used for select government and private transactions, and a second rate used by the rest of the market. In March 1993, the dual system was replaced with a unified exchange rate, moving the currency towards a managed float.

Note: “The experience with a market-determined exchange rate system in India, since 1993, is generally described as satisfactory, as orderliness prevailed in the Indian market during most of the period.”

The bout of devaluation in 1991 was not the first time India flirted with currency devaluation. On 6th June 1966, the rupee was devalued dramatically in response to the first significant balance of payments crisis faced by independent India.