INDEX

Previous
B. R. Ambedkar
Administration:
Changes in 1833, 21
Civil Service reforms, 1853, 90, 91, 97
Table of costs, 92
Agricultural exports, 104
Althorpe, Lord, 161 note
Babington Smith, Sir Henry. See Smith Committee on Currency
Bagehot, Walter, 130, 131
Baker, Hon. Mr., 301
Bank Charter Act, 1884, 279
Bank of England Notes, depreciation, 1797–1818, 243, 247
Banks in India, table, 37
Barbour, D., 184 note
Belgium, Bimetallic system in, 23
Bengal:
Double standard experiments, 1766–93, 14
Reform of currency, 18
Bimetallism:
Abrogation in India, 22 et seq.
Drawbacks of, 138
Gold to silver ratio, 83
Indian Government's position, 140, 141
Market and Mint ratio divergences, 84, 85
Monetary conferences, discussions at, 135, 136
Bombay, currency reforms, 16, 18
Brown, Hon. Claud, 45 note
Cairnes, Prof. J. E., 47 note, 82
Cannan, Prof. Edwin, 246 note, 262 note, 297
Cassel, Prof. G., 253 note
Cassels, Mr., 34, 35, 41
Castlereagh, Lord, 211, 241 note
Chamberlain Currency Commission, 1913, 164, 167, 171, 187, 225, 231 note, 234, 237, 249, 259, 272, 277, 278 note, 302
Cheque system, failure of, 64
China, trade with India, 1889–1908, table, 183
Civil Service, economies in, 90, 91, 97
Coinage and Mint Act, 1870, 49 et seq., 147
Coinage under the Moghul Empire, 4
Cotton trade, development in India, 102, 106
Council Bills:
Drawings, 1803–94, 189
History of, 263
Reverse Councils, 166, 220 et seq.
Sales of, 130, 131, 166, 187, 213, 264 et seq.
Cromer, Lord, 113
Currency. See Indian Currency Currency Act, 1835, 22, 23, 36
Curzon, Lord, 275
Dalal, Mr., 260 note
Datta, Mr., 210 note
Davenport, Prof., 257
Dawkins, Hon. C. E., 274, 277
Demonetization of gold, 1833, 19
Demonetization of silver, 71 et seq.
Discount rates, chart, 66
Dislocation of silver standard parity, 49 et seq.
East India Company:
Double standard experiments, 1766–93, 14 et seq.
Silver standard prescribed, 9
English currency, early history, 2, 6, 27
European countries, money stocks distribution, table, 134
Exchange:
Fall of, economic effects, 87 et seq.
High exchange policy, 1920, 208
“Natural level” fallacy, 225, 226
Stabilization of, 203
Exchange rate:
Gold value of rupee in terms of, 196
London on Calcutta, 1914, 1915, table, 192
London on India, 1907–8, table, 191
Purchasing power parity, 252 et seq.
Exchange standard, stability of, 181 et seq.
Falkner, Prof. R. P., 62 note
Fetter, F. A., 234 note
Finances, Imperial and Provincial, separation between, 207
Fisher, Prof., 83, 84, 250, 257
Fowler, Sir Henry, Indian Currency Committee, 1898–99, 156, 239, 263, 269, 283, 288
Foxwell, Prof. H. 8., 72 note, 79 note
France:
Bimetallic system, 23
English and French currency systems compared, 161
Gold and silver mintage, 1803–73, table, 137
Germany, currency difficulties in, 132
Giffen, Sir Robert, 129
Gokhale, Hon. Mr., 258, 303 note
Gold:
Consumption in various countries, table, 245
Discoveries, effect of, 23, 25
Issue, 1917, 218
Notes, value in terms of, table, 243
Price-levels compared with other commodities, 242
Silver and gold, value and production, 76 et seq., 79
Gold currency for India:
Arguments in favour, 257 et seq.
Commission of 1868, 47
Imports of gold, 1863–64, 42
Legal tender notification, 1864, 46
Proposals, 1864–66, 42 et seq.
Gold exchange standard:
Chamberlain Commission, 1913, 164, 167, 171
Mints, closing for silver, 168, 169
Objections to, 167
Gold payments:
Army remittances, 97
Burden of, 186
Cf. W. C. Mitchell. “The Rationality of Economic Activity,” Journal of Political Economy, 1910, Vol. XVIII, pp. 97 and 197; also “The RÔle of Money in Economic Theory,” by the same, in the American Economic Review (Supplement), Vol. VI, No. 1, March 1916.
[2]

For the whole of this discussion, cf. H. J. Davenport, The Economics of Enterprise (1913), Chapters II and III.
[3]

Prinsep, J., Useful Tables, Calcutta, 1834, pp. 15–16.
[4]

Robert Chalmers, History of Colonial Currency, 1893, pp. 336, 340.
[5]

Dr. P. Kelly, The Universal Cambist, 1311, p. 115.
[6]

Money and Mechanism of Exchange (1890), p. 95.
[7]

Dr. P. Kelly's view is that they circulated at their market ratio (loc. cit.). On the other hand, Sir R. Temple says: “In ancient and mediaeval India the relative value of the coins of each metal was fixed by the State, and all were legal tender virtually without any formal limitation” (“General Monetary Practice in India,” Journal of the Institute of Bankers, Vol. II, p. 406). On another occasion he said: “The earliest Hindu currency was in gold with a single standard. The Mohammedans introduced silver, and in later times up to British rule there was a double standard, gold and silver” (ibid., Vol. XV, p. 9). In contrast to this it may be noted that the Preamble to currency Regulation XXXV of 1793 and other currency Regulations of early date make it a point to emphasize that under pre-British rÉgime there was no fixed ratio between the mohur and the rupee.
[8]

Cf. Prof. S. V. Venkateswara, on “Moghul Currency and Coinage” in the Indian Journal of Economics, July, 1918, p. 169; and F. Atkinson, The Indian Currency Question (1894), p. 1.
[9]

According to the Mohammedan historian, Khafi Khan, it enraged the Emperor Aurangzeb when the East India Company in 1694 coined some rupees at Bombay “with the name of their impure king” (Imperial Gazetteer of India, Vol. IV, p. 515).
[10]

It is stated in the Imperial Gazetteer of India (Vol. IV., p. 514), that in the early days of the Moghul rule there was only one Mint—at Delhi—which struck the Imperial coins. The Emperor Sher Sha was the first to introduce a plurality of Mints for coinage purposes—a practice continued and extended by the later emperors until between the reigns of Akbar and Bahadur Sha II the Mints numbered about 200. From the East India Moral and Material Progress Report for 1872–73 it is clear that not every Mint was open to the coinage of all three metals, gold, silver and copper; but that some Mints coined only gold, others silver, and the rest copper (see Report, pp. 11–12).
[11]

Prinsep, J., op. cit., p. 18.
[12]

It was this necessity for ascertaining the true bullion value of the debased coins which gave rise to that class of money-changers known as Shroffs, who specialised in the business of evaluating the coins at their proper discount from the standard purity by means of the dates and other characteristics engraved upon them.
[13]

It is stated that Dr. Roxburgh, who was an eye-witness, was so much impressed by the sufferings of the poor owing to the bad state of the currency that he urged upon A. Dalrymple in a letter dated June 30, 1791, to give prominence to the evils by inserting a paper in his Oriental Repertory (2 vols., London, 1808), “on the current coin in circulation over the Company's Territories which might be productive of the most solid and lasting advantage to the Governing and the Governed,” and added, “You may be able to correct the evil, by which you will certainly go to heaven, if the prayers of the poor avail, and I may get a step nearer paradise.” Observations on the Copper Coinage wanted in the Circars, by A. Dalrymple, London, 1794, p. 1.
[14]

Capital, Currency and Banking, 1847, p. 15.
[15]

H. of C. Return 127 of 1898.
[16]

Cf. The Despatch, op. cit., par. 8.
[17]

Cf. para. 26–28 of the letter from James Prinsep to the Calcutta Mint Committee, printed in the Appendix to the Indian Tables by John Muller, Calcutta, 1836.
[18]

Ibid. par. 28. How the English and the Indian systems of weights were made to correspond to each other may be seen from the following:—

Indian.

English.

8 ruttees

=

1 massa

=

15 troy grs.

12 massas

=

1 tola (or sicca)

=

180 troy grs.

80 tolas

=

1 seer

=

2½ troy pounds.

40 seers

=

1 maund (or mun)

=

100 troy pounds.
[19]

Attention may be drawn in this connection to the dissenting opinion of Captain Jervis on the project of 180 grs. troy as the unit of weight for the rupee. Cf. his most exhaustive treatise called The Expediency and Facility of establishing the Metrological and Monetary Systems throughout India on a Scientific and Permanent Basis, grounded on an Analytical Review of the Weights, Measures and Coins of India …, Bombay, 1836, pp. 49–64.
[20]

Cf. The Despatch, op. cit., par. 9.
[21]

F. C. Harrison, “The Past Action of the Indian Government with regard to Gold,” in Economic Journal, Vol. III, p. 54 et seq. Also Minute by Sir John Shore, in Bengal Public Consultations, dated September 29, 1796.
[22]

H. Dodwell, “Substitution of Silver for Gold in South India,” in the Indian Journal of Economics, January, 1921.
[23]

Report of Dr. Scott on the History of Coinage in the Bombay Presidency, with Appendices, Public Consultations (Bombay, dated January 27, 1801).
[24]

Cf. Fort St. George Public Depart. Consultations, No. 19, dated January 7, 1818.
[25]

Cf. Bombay Financial Consultations, dated October 6, 1824.
[26]

Bengal Regulation XI of 1819.
[27]

Bengal Regulation VII of 1833.
[28]

The Court of Directors were willing to permit the coinage and circulation of gold unlinked to the rupee, for they had observed in their Despatch:—

“16. Although we are fully satisfied of the propriety of the silver rupee being the principal measure of value and the money of account, yet we are by no means desirous of checking the circulation of gold, but of establishing a gold coin on a principle fitted for general use. This coin in our opinion should be called a gold rupee and be made of the same standard as the silver rupee.”
[29]

Cf. Fort St. George Public Consultations of August 19, 1817, particularly the letter of the Accountant-General entered thereon.
[30]

Cf. The Public Despatches to Madras dated March 6, 1810; July 10, 1811; and June 12, 1816.
[31]

Preamble to the Bengal Regulation XIV of 1818.
[32]

It, however, increased its weight from 190·895 to 204·710 troy grs.
[33]

Bengal Regulation VII of 1833.
[34]

It may be that this alteration was also intended to make the Sicca rupee eleven-twelfths fine.
[35]

Cf. Despatch to Bengal dated March 11, 1829.
[36]

The Accountant-General of Bengal, in a letter to the Calcutta Mint Committee, dated November 21, 1823 wrote:—

“Par. 32. The amount of the balance must also necessarily depend upon the state of the currency. If the Madras, Bombay, and Furrukabad rupees instead of differing in weight and intrinsic value were coined of one standard weight and value bearing one inscription and in no way differing, the surplus of one Presidency would at all times be available for the deficiency of another, without passing through the Mint, and the balance of India might be reduced in proportion to the increased availability of currency for the disbursements of the three Presidencies” (Bombay Financial Consultations, February 25, 1824).
[37]

The evil of the system had already made itself felt in Bombay, where the Government had been obliged by a Proclamation dated April 9, 1824, to declare the Furrukabad rupee of 1819 standard as legal tender within its territories on a par with the Bombay rupee, in order to facilitate the supply operation from Bengal. Cf. Bombay Financial Consultations, dated April 14, 1824.
[38]

3 & 4 Will, IV, c; 85.
[39]

Cf. the sentiments of Tucker in his Memorials of Indian Government (ed. by Kaye), 1853, pp. 17–19.
[40]

Cf. their Financial Despatch to India, No. 9, dated July 27, 1836.
[41]

Section 9 of Act XVII of 1835.
[42]

To mention only one, cf. S. V. Doraiswami, Indian Currency, Madras, 1915. passim.
[43]

Laughlin, J. L, History of Bimetallism, New York, 1886, pp. 79–83.
[44]

The cultural influence of France had led the other countries of Latin origin to adopt the French monetary system. The political independence acquired by Belgium in 1831 was followed by a change in her monetary system. By the law of 1832, Belgium from a monetary point of view, became a satellite of France. By that law she adopted in its entirety the monetary system of France, and even went so far as to give the French gold pieces of 20 and 40 francs and to the French silver 5-franc pieces the power of legal tender in Belgium. In Switzerland, Art. 36 of the Constitution of 1848 had vested in the Federal Government the authority to coin money. The law of May 7, 1850, adopted the French monetary system for Switzerland: Art. 8 declared “that such foreign silver coins as were minted in sufficiently close proximity with the French system might be granted a legal status as regular media for the payment of debts in Switzerland.” The various Italian States, prior to unification, had, like the Swiss Cantons, each its own currency. But with the desire for uniformity of coinage consequent upon unification there arose a problem either of selecting one of the old systems or of adopting a new one which would be common to the whole country. Some form of a grateful memorial to France was uppermost in the minds of the Italians for the help the French gave in the matter of their independence, and the adoption of the French monetary system for Italy was deemed to serve the purpose. Fortunately, Sardinia already possessed the French system, and the law of August 24, 1862, extended it to the whole of Italy, with the lire as the unit, and also conferred legal-tender power on the coins of France, Belgium, and Switzerland. Cf. H. P. Willis, History of the Latin Monetary Union, Chicago, 1910, pp. 15, 27, 36–37.
[45]

Switzerland was the first to reduce the amount of silver in her small coins in order to keep them in circulation. But these Swiss coins of reduced fineness crossed the national frontier and, as they were legal tender in other countries of Latin origin, began to displace their dearer coins of similar denominations, which contained more silver but which passed current at the same nominal value. This brought forth a decree in France (April 14, 1864) which revoked the legal-tender power of these debased Swiss coins in French territory. This, of course, compelled resort to a concerted action on the part of all the Latin countries concerned.
[46]

For more particulars of the Latin Union, cf. Laughlin, op. cit., pp. 146–9.
[47]

Cf. H. of C. Return, East Indian (Coinage) 254 of 1860.
[48]

Ibid., p. 8.
[49]

Ibid., p. 10.
[50]

The author of A Treatise on the Coinage of the Realm was anticipated by Sir John Shore, the Governor of Bengal, in his Minute, op. cit., par. 55.
[51]

Cf. H. M. Dunning, Indian Currency, 1898, passim; also S. V. Doraiswami, op. cit., passim.
[52]

Cf. Dana Norton, The Silver Pound, 1887, p. 161.
[53]

Cf. the evidence of A. Baring (afterwards Lord Ashuburton) before the Committee for Coin (1828), H. of C. Return 31 of 1830.
[54]

See his Memorandum to the Cabinet printed by Gibbs, A Colloquy on Currency (1894), Appendix, p. xlvii.
[55]

For which, see AndrÉadÈs, History of the Bank of England, Supplement I.
[56]

For the original purpose of this defunct proviso, see Peel's Speech on the Bank Charter Act, dated May 20, 1844, Hansard, Vol. LXXIV, pp. 1334–35.
[57]

In theory Holland had adopted bimetallism in 1816. But the legal ratio of 15·873 to 1 had undervalued silver so much that it had made gold the chief circulating medium of Holland.
[58]

Report of the U. S. Silver Commission of 1876, p. 68.
[59]

Works, p. 271
[60]

Mr. Dodwell, in his otherwise excellent article, op. cit., seems to convey that silver was substituted for gold in Southern India as a result of the natural preference of the people for the former metal. So eager is he in meeting the contentions of writers like Mr. Doraiswami that he fails to see how his own facts controvert his own thesis.
[61]

The total coinage of India from 1800 to 1835 was, according to Mr. F. C. Harrison's estimate in the Calcutta Review, July, 1892:—

Gold

3,845,000 ounces

Silver

3,781,250,000 ounces

N.B.—In the case of silver, rupees are converted into ounces for comparison.
[62]

Cf. the article “The Silver Question as regards India,” in the Bombay Quarterly Review, April, 1857.
[63]

Cf. Debates at the East India House on Duties affecting Indian Commerce, vide the Asiatic Journal and Monthly Register for British and Foreign India, China, Australia (London, New Series, Vol. XXXVII, January, and Vol. XXXVIII, May, 1842).
[64]

For the history of those imposed by England, cf. Ruding, Annals of Coinage, 3rd ed. Vol. I, pp. 353–4, 372, 376, 386–7; Thomas Violet, An Appeal to CÆsar, London, 1660, p. 26.
[65]

The following figures of the export of precious metals to India from England are interesting:—

1652–1703

£1,131,653 (from Mr. Petrie's Minute).

1747–1795

£1,519,654 (from Mr. Petrie's Minute).
[66]

For the Proceedings of the Committee, see India Office Records, “Home Miscellaneous” Series, Vol. 456.
[68]

Prepared from figures given in Palgrave's “Memorandum on Currency and Standard of Value,” Appendix B to Third Report of the Royal Commission on Depression of Trade and Industry. C4797 of 1886. Figures for the production of gold and silver, which are for calendar years, are added from the “Silver Question and the Gold Question,” by R. Barclay.
[67]

Minute on Gold Currency for India, dated December 8, 1863, in the Report of the Bombay Chamber of Commerce, 1863–64. App. I, p. 189.
[69]

Minute on Gold Currency for India, dated December 1, 1863. Report, op. cit., p. 184.
[70]

Report, op. cit. p. 189.
[71]

Amount of Indian Treasury notes outstanding:—

On April 30, 1850

£804,988

Extracted from Table No. 2 of the Return relating to East India Revenues, etc., Parliamentary Paper 201, VIII, 1858.

On April 30, 1851

£802,036

On April 30, 1852

£770,301

On April 30, 1853

£850,432

On April 30, 1854

£850,627

On April 30, 1855

£889,875

On April 30, 1856

£967,711
[72]

How to Meet the Financial Difficulties of India, by A. C. B., London, 1859, p. 13. This is in many ways a most remarkable pamphlet which suggested many of the later reforms in Indian currency and banking.
[73]

The matter was first broached by the native shroffs and merchants of Calcutta in April, 1859, in a letter to the President of the Bengal Chamber of Commerce. Both agreed to urge upon the Government the necessity of a gold currency in India. Cf. Papers relating to the Introduction of a Gold Currency in India, Calcutta, 1866, pp. 1–3.
[74]

Ibid., p. 6.
[75]

Cf. Minute by the Rt. Hon. James Wilson, dated December 25, 1859, ibid., p. 23.
[76]

R. M. Martin, The Indian Empire, Vol. I, p. 565. N.B.—The table in original does not specify dates, but internal evidence shows that it is about 1856.
[77]

Ibid., p. 26.
[78]

Par. 59 of the Secretary of State's Despatch, No. 158, dated September 16, 1862.
[79]

See par. 64 of his Despatch, supra.
[80]

Cf. his letter to the Government of Bombay dated January 1, 1864, Vide Papers, etc., on the Introduction of Gold in India, pp. 51–69.
[81]

Report of the Bombay Chamber of Commerce, 1863–64, App. I, p. 206.
[82]

This time the Government was memorialized by all the Chambers of Commerce—Bengal, Bombay, and Madras. Action was also urged by the Bombay Association and the Manchester Chamber of Commerce. But the movement derived its greatest strength from the support of the Government of Bombay, particularly by Sir William Mansfield's famous Minute on Gold Currency for India.
[83]

Sources same as those used in the case of Table IV.
[84]

Cf. his Minute dated June 20, 1864. Vide Papers, etc., on Gold in India, p. 147 et seq. He was even opposed to holding silver bullion in the paper currency reserve, for this involved on the Currency Department the obligation to get the silver coined, which was a matter of time having regard to the limited capacity of the Indian Mints at the time, while the notes issued were payable in coin on demand. There was a run on the Paper Currency Department, which found itself short of coin.
[85]

Cf. Government of India's Despatch, No. 89, dated Simla, July 14, 1864,
[86]

Financial Despatch from the Secretary of State, No, 224, dated September 26, 1864.
[87]

Cf. Letter from the Hon. Claud Brown to the Hon. Sir C. E. Trevelyan, dated Calcutta, May 28, 1864. Vide Papers, etc., on Gold, p. 265.
[88]

The reason why he preferred the ratio of 10 to 1 was that that was the prevalent market ratio in India. His argument was that “the sovereign must be rated for circulation in India, not with reference to its English, but to its Indian price estimated in silver.” Probably he was unwilling to overrate the sovereign because of his fear that “the existing Indian currency would be rapidly revolutionized and creditors would receive much less than their due.” Cf. his Minute dated November 23, 1864. Vide Papers, etc., on Gold in India,
[89]

Cf. Appendix A to the Minute by Sir William Mansfield on Gold Currency for India, H. of C. Return 79 of 1865.
[90]

Resolution in the Financial Department dated February 3, 1866, in the Fort William Gazette of the same date, under Notification No. 592.
[91]

For the Report of the Commission, see H. of C. Return 148 of 1868.
[92]

It is true Prof. J. E. Cairnes was against the introduction of a gold standard in India; but later he withdrew his objections. Cf. his Essays in Political Economy (London, 1873, pp. 88–90).
[93]

Cf. J. R. McCulloch, Dictionary of Commerce, Ed. 1869, p. 1131.
[94]

Mr. H. B. Russell says that they retained the silver standard because they profited by it on their remittances. Cf. his International Monetary Conferences, 1898, p. 32.
[95]

The original mint and coinage bill contained clauses embodying the notification of 1868, compelling the Government to receive sovereigns at Public Treasuries. Cf. Gazette of India, Part V, dated July 23, 1870. But such was the degree of indifference shown that they were afterwards dropped by the Select Committee, which preferred to leave the matter to the discretion of the Executive.
[96]

Cf. the speech of the Hon. Mr. Stephen on September 6, 1870, introducing the coinage and mint bill. Vide Supreme Legislative Council Proceedings (abbreviated into S.L.C.P.), Vol. IX, p. 398.
[97]

This may be seen from the following:—

  1. Gold Coins. (i), (ii), and (iii) were authorized by Section VII of Act XVII of 1835. Only (iv) was an addition made by this Consolidating Act of 1870.

  2. Silver Coins. (i), (ii), and (iii) were authorized by Section I of Act XVII of 1835. This Act had also authorized the issue of a silver coin called “Double Rupee,” but this was discontinued by Section II of Act XIII of 1862, which substituted in its place the silver coin No. iv.

  3. Copper Coins. (i), (ii), and (iv) were first authorized by Section I of Act XXI of 1835, which, however, restricted their circulation to the Presidency of Bengal. They were afterwards universalized for the whole of India by Act XXII of 1844. Coin No. (iii) was first introduced by Section II of Act XI of 1854.
[98]

This machinery is provided in England by what is known as the “Trial of the Pyx.” For a history of this institution and the way it functions, cf. H. of C. Return 203 of 1866. During the time of the East India Company the maintenance of the standard purity of the Indian coins always formed a most anxious concern of the Court of Directors. The coins of Indian mintage were regularly required to be sent over to England, where they were tested at a special Trial of the Pyx and the verdict reported back for the future guidance of the Mint Masters in India. Cf. H. of C. Return 14 of 1849. Since the winding-up of the Company there is no machinery to bring the Mint Masters to book.
[99]

Cf. F. C, Harrison, Economic Journal, 1891, Vol. I, p. 726.
[100]

The reasons for such control are to be found in the peculiar relationship that subsisted between the Government and the Presidency banks. Prior to 1862, as a safeguard against their insolvency, the Presidency Bank charters restricted the kind of business in which they were to engage themselves. Put very briefly, the principal restrictions imposed prohibited the banks from conducting foreign-exchange business, from borrowing or receiving deposits payable out of India, and from lending for a longer period than six months, or upon mortgage, or on the security of immovable property, or upon promissory notes bearing less than two independent names, or upon goods unless the goods or title to them were deposited with the banks as security. The Government held shares in the banks and appointed a part of the Directorate. In 1862, when the right of note issue was withdrawn, these statutory limitations on the business of the banks were greatly relaxed, though the Government power of control remained unchanged. But, the banks having in some cases abused their liberty, nearly all the old restrictions of the earlier period were reimposed in 1876 by the Presidency Banks Act, Government, however, abandoning direct interference in the management, ceasing to appoint official directors, and disposing of its shares in the banks. Some of these limitations have been incorporated in Act XLVII of 1920, which amalgamated the three Presidency banks into the Imperial Bank of India. Banks other than Presidency banks have been entirely immune from any legislative control whatsoever, except in so far as they are made amenable to the provisions of the Indian Companies Act. Cf. in this connection Minutes by Sir Henry Maine, No. 47, and the accompanying note by W. Stokes. The control of these banks is one of the important problems of banking legislation in India.
[101]

It should, however, be noted that in 1860 the circulation Of notes of the three Presidency banks was larger than their current accounts, as is evident from the following:—

Name of the Bank

Accounts Current.

Notes in in Circulation.

Bank of Bengal

£1,254,875

£1,283,946

Bank of Bombay

£438,459

£765,234

Bank of Madras

£161,959

£192,291

(Bankers' Magazine, April, 1893, p 547.)
[102]

For a summary of the controversy re Bank issue v. Government issue, see Report of the Bombay Chamber of Commerce for 1859–60, Appendix L, pp. 284–318.
[103]

Sect. IV of Act XIX of 1861.
[104]

Cf. Sir Richard Temple's speech introducing the Paper Currency Bill, dated March 25, 1870. Supreme Legislative Council Proceedings, Vol. IX. pp. 151–52.
[105]

Act XIX, Sec. X.
[106]

Act III, Sec. 16.
[107]

Act XV, Sec. I.
[108]

The following table shows the distribution of the paper currency reserve at three different periods:

Period.

Note Circulation.

Composition of the Reserve.

Percentage of each Component of the Reserve to the Total Circulation.

Silver.

Gold.

Securities.

Total

Silver.

Gold.

Securities.

1862–1871

7·63

4·80

0·03

2·80

7·63

63

—

37

1872–1881

11·82

5·98

—

5·84

11·82

51

—

49

1882–1891

15·74

9·64

—

6·10

15·74

61

—

39
[109]

For a clear and concise sketch of the organization of the paper currency in India, see the Note of the Government of India in the Report of the U.S. Director of the Mint, Washington, 1894, pp. 231—33.
[110]

Sec. 3 of Act III.
[111]

It may be pointed out that although the Presidency banks had ceased to issue notes, yet under the agreements made with the Government in virtue of Act XXIV of 1861 the banks were employed by the Government “for superintending, managing and becoming agents for the issue, payment and exchange of promissory notes of the Government of India, and for the carrying on the business of an agency of issue” on a remuneration of ¾ per cent. per annum “on the daily average amount of Government currency notes outstanding and in circulation through the agency of the bank.” In the conflict that ensued between the Government of India and the Secretary of State as to the propriety of thus employing the banks, the former was in favour of the plan because it believed that it would help the extension and popularization of the notes, while the latter disliked the arrangement because it seemed to him to compromise the principle of complete separation between the business of issue and the business of banking. Neither of the two, however, grasped the fact that the profit on remittances on different centres owing to the prevalence of internal exchange was so great that the commission allowed to the banks was an insufficient inducement to cause them to promote the circulation of notes by providing facilities at their branches for the free encashment of them. So high was the internal exchange, and so reluctant seemed the banks to popularize the notes, that Government finally discharged them from being their agents for paper currency from January 2, 1866. See House of Commons Return, East Indian (Paper Money) 215 of 1862.
[112]

Cf. the speech of the Hon. Mr. Laing on the Paper Currency Bill dated February 16, 1861, S.L.C.P., Vol. VII, pp. 73–74.
[113]

Each sub-circle had within it a number of agencies of issue; but the agencies were centres not of encashment but only of issue.
[114]

For the inconveniences of the “circle” system and the various measures contemplated by Government to facilitate the encashment of notes, see Report of the Bombay Chamber of Commerce for 1868–69, Appendix X, pp. 309–16.
[115]

Cf. the whole speech of the Hon. Mr. Sconce dated September 22, 1860, S.L.C.P., Vol. VI, p. 1143 et seq.
[116]

Cf. the speech of Mr. Wilson, the originator of paper currency in India, dated March 3, 1860, where he says: “In short, to abstract so much coin from the mere mechanical purpose of the circulation, supplying its place with convertible paper, would be exactly the game in effect as if suddenly, in the control of the Maidan, a rich silver mine had been discovered which produced silver at little or no cost.” Supreme Legislative Council Proceedings, Vol. VI, p. 250.
[117]

Cf. the speech of the Hon. Mr. Forbes, dated September 22, 1860, ibid., p. 1154,
[118]

Cf. the speech of the Hon. Mr. Forbes, dated July 13, 1861. Supreme Legislative Council Proceedings, Vol. VII, p. 768.
[119]

Cf. the speech of the Hon. Mr. Sconce, September 22, 1880, S.L.C.P., Vol. VI, p. 1151.
[120]

For such extra legal facilities, and measures adopted to materialize them, cf. the interesting speech of the Hon. Sir Richard Temple on the Paper Currency Bill dated January 13, 1871, S.L.C.P., Vol. X, pp. 22–25.
[121]

The Money Market and Paper Currency of British India, Batavia, 1884, p. 3.

It should be noted that the slack and the busy seasons are not uniformly distributed over the whole surface of the country. The distribution is roughly as follows:—

Months

Eastern India

Western India. Bombay and Karachee.

Northern India.

Southern India. Madras.

Rangoon.

Calcutta.

Cawnpore.

Lahore.

Busy

3 months

4 months

6 months

6 months

9 months

6 months

Slack

9 months

8 months

6 months

6 months

3 months

6 months

Jan.

Busy

Slack

Busy

Slack

Busy

Slack

Feb.

Busy

Slack

Busy

Busy

Busy

Busy

March

Busy

Slack

Busy

Busy

Busy

Busy

April

Slack

Slack

Busy

Busy

Busy

Busy

May

Slack

Slack

Slack

Slack

Busy

Busy

June

Slack

Slack

Slack

Slack

Busy

Busy

July

Slack

Slack

Slack

Slack

Slack

Busy

Aug.

Slack

Busy

Slack

Slack

Slack

Slack

Sept.

Slack

Busy

Slack

Busy

Slack

Slack

Oct.

Slack

Busy

Slack

Busy

Busy

Slack

Nov.

Slack

Busy

Busy

Busy

Busy

Slack

Dec.

Slack

Slack

Busy

Slack

Busy

Slack

Busy

Jan. to March

Aug. to Nov.

Nov. to April

Feb. to April

April to June

Feb. to July

Slack

April to Dec.

Dec. to July

May to Oct.

May to Aug.

July to Sept.

April to Dec.

Busy

—

—

—

Sept. to Nov.

Oct. to March

—

Slack

—

—

—

Dec. to Jan.

—

—
[123]

The rate of discount of the Bank of Bengal for private paper running thirty days and after was altered—

In 1876 16 times, with 6½ per cent. as minimum and 13½ per cent. as maximum.
In 1877 21 times, with 7½ per cent. as minimum and 14½ per cent. as maximum.
In 1878 10 times, with 5½ per cent. as minimum and 11½ per cent. as maximum.
In 1879 15 times, with 6½ per cent. as minimum and 11½ per cent. as maximum.
In 1880 8 times, with 5½ per cent. as minimum and 9½ per cent. as maximum.
In 1881 9 times, with 5½ per cent. as minimum and 10½ per cent. as maximum.
In 1882 9 times, with 6½ per cent. as minimum and 12½ per cent. as maximum.
In 1883 14 times, with 7½ per cent. as minimum and 10½ per cent. as maximum.

(Van Den Berg, loc. cit.)
[124]

Cf. Prof. R. P. Falkner in A Discussion of the Interrogatories of the Monetary Commission of the Indianapolis Convention, 1898, Publications of the University of Pennsylvania in Political Economy and Public Law, No. 13, pp. 26–26.
[125]

Op. cit., p. 7.
[126]

The Indian Paper Currency Act carried the principle of separation further than did the English Bank Charter Act. It not only prevented the Issue Department being conducted under the Ægis of a Banking Department, but also disallowed the two being housed under the same roof. Such an ideal of separation was held out by Sir Charles Wood during the debate on the Bank Charter Act. Cf. Hansard Parliamentary Debates, Vol. LXXIV, p. 1363. Though he was then disappointed, he did not fail to realize his ideal when he became the Secretary of State for India.
[127]

Cf. his Essay on the “Frequent Autumnal Pressure in the Money Market and the Action of the Bank of England,” Investigations in Currency and Finance (ed. Foxwell), 1884, p. 179. Italics by Jevons. There is, however, an apparent misprint in the original, which at the close of the quotation reads “as they would have under a restricted system.”
[128]

Money and the Mechanism of Exchange, Kegan Paul, London, 1890, p. 225.
[129]

For American experience, cf. E. W. Kemmerer, “Seasonal Variations in the New York Money Market,” in The American Economic Review, March, 1911.
[130]

Cf. India in 1880, by Sir Richard Temple, p. 469; Sir Charles Wood's Administration of Indian Affairs, p. 89; also The Indian Statesman, January 15 (1884).
[131]

It should, however, be noted that between 1862 and 1876, at some centres comprising the head offices and branch offices of the Presidency banks, the Independent Treasury System was suspended. By way of compensation for the loss of their right of note issue, the Presidency banks were given certain concessions by the Government under agreements entered into in accordance with Act XXIV of 1861. Among the concessions one was the use by the banks of Government balances. The first agreement, that of 1862, conceded to the banks the following privileges in regard to the Government balances: (1) The unrestricted use for banking purposes “of all moneys and balances which but for the agreement would have been received or held at the General Treasury” up to the limit of 70 lakhs in the case of the Bank of Bengal, 40 lakhs in the case of the Bank of Bombay, and 15 lakhs in the case of the Bank of Madras. (2) The option of setting aside the excess over these sums in a separate strong room for production when demanded, or of investing it in Government paper or other authorized securities, the power of investment being subject to the condition that the banks should be “at all times answerable and accountable to Government for the surplus cash balance for the time being.” (3) The right to interest from Government on the difference between the actual balance and 50 lakhs in the case of the Bank of Bengal, 30 lakhs in the case of the Bank of Bombay, and 10 lakhs in the case of the Bank of Madras, whenever the balances at these banks fell below these minima. (4) Permission to the banks to use the Government balances at their branches on similar terms, suitable limits being fixed in each case, as in the head office agreements.

A year after the agreements were executed difficulties arose with the Bank of Bengal, which had locked up the funds to such an extent that it was unable to meet the demands of the Government on the public balances it held. Negotiations were therefore opened in 1863 for the revision of the agreements, and the revised agreements came into force on January 2, 1866. They contained the following provisions regarding the public balances: (1) Undertaking by Government to maintain in the hands of the banks at their head offices an “average cash balance” of 70 lakhs at the Bank of Bengal, 40 lakhs at the Bank of Bombay, and 25 lakhs at the Bank of Madras, “so far as the same may conveniently be done.” (2) Permission to the banks to use the whole balances for the time being deposited with them for banking purposes. (3) The right to interest from Government when the Government balance at the head offices of the Bank of Bengal, Bank of Bombay, and Bank of Madras fell below the minima of 45 lakhs, 25 lakhs, and 20 lakhs respectively. (4) Permission to employ “the whole of the balances (at branches) however large for the time being” for banking purposes, subject to the condition that each branch should “at all times be ready to meet the drafts of the Government" to the extent of the Government balances at the branch.

These revised agreements were to remain in force till March 1, 1874. In 1874 the question of the revision of the charters of the Presidency banks was under consideration, and it was the aim of the Government to continue to the banks the right to use the whole Government balances. Just at this time (1874) difficulties occurred with the Bank of Bombay and the Government could not draw upon their balances. This led to a reconsideration of the policy of merging the Government balances with the bank balances and leaving them in the custody of the banks. After a somewhat lengthy discussion the Government of India reverted to the system of Independent Treasury by instituting what were called Reserve Treasuries at the headquarters of the Presidencies which held the Government balances previously held by the Presidency banks. For a history of this episode see House of Commons Returns 109 and 506 of 1864; also J. B. Brunyate, An Account of the Presidency Banks, Chap. VII.
[132]

In the despatch of May 6, 1875, sanctioning the re-establishment of the Independent Treasury System, the banks were admonished by the Secretary of State thus: “Capital supplied by Government, and not representing the savings of the community, is a resource on whose permanence no reliance can be placed, and which therefore tends to lead traders into dangerous commitments. It gives ease for a time, and produces prosperity which is at the mercy of an accident. A political exigency suddenly withdraws the adventitious resource, and the commerce which trusted to it finds itself pledged beyond what its own resources can make good.” Under the arrangements of 1876 leading to the establishment of the Reserve Treasuries, the Government agreed as before to pay interest to the banks when their balances at the banks fell below certain minima. The Government entered into no formal undertaking as regards maxima, and gave the banks to understand “that the Government will ordinarily not leave with the headquarters of the banks, otherwise than temporarily, more than the following sums: Bank of Bengal 100 lakhs, Bank of Madras 30 lakhs, and Bank of Bombay 50 lakhs. But this condition will not be inserted in the contract, which will impose no obligation upon the Government to leave any balances whatever with the banks. … The Government will not undertake to give to the banks the exclusive custody of all the public balances where the Government banks with the banks.” The question of the amount of balances which the Government would leave with the banks in the ordinary course being thus settled, the only way left open to give help to the banks to meet seasonal demands was to grant loans to the Presidency banks for its balances held in the Reserve Treasuries. Up to 1900 the Government had refused to make any loans to the banks. After 1900 it agreed to make such loans of a limited amount at the bank rate. Up to 1913 only six loans were made, which shows that the terms of such loans were rather onerous. The Chamberlain Commission of 1913 recommended loans rather than the abolition of the Independent Treasury system. The war, however, hastened the course of events. It proved the necessity of co-operation between the Presidency banks and the Government, and also the need of a large and powerful Banking Institution. This was accomplished by the amalgamation of the Presidency banks into an Imperial Bank of India (Act XLVII of 1920), with the inauguration of which the Independent Treasury system is again in the process of abolition. For a history of episodes of the Independent Treasury after 1876, see Appendices to the Interim Report of the Chamberlain Commission, Vol. I, Cd. 7070 of 1913, Nos. I and II.
[133]

It appears, however, from the chart that the rupee-sterling exchange before 1873 was not quite stable. But the fluctuations in it are to be attributed to quite a different set of factors. It should be noted that the rates of exchange used for reducing the Indian moneys into sterling during the time of the East India Company had been various: moreover, they had so little relation to the intrinsic value of the coins exchanged that the actual rates officially given were far from the actual market rates. As having a bearing on this interesting subject, consult H. of C. Sessional Papers 735 II of 1831–32; Appendix No. 20, Correspondence, etc., relating to the rates of exchange at which the currencies of India are converted into sterling; also Tucker, H. St. George, Remarks on the Plans of Finance, 1821, passim, and Memorials of Indian Government, 1853, by the same, pp. 382–85.
[134]

Normal only if 15½ to 1 be taken as the normal ratio between gold and silver, which was the case for nearly seventy years.
[135]

Report of the Royal Commission on International Coinage, 1868, p.v.
[136]

Cf. Russell, H. B., International Monetary Conferences, 1898, pp. 18–25.
[137]

Quoted by Russell, op. cit., p. 25.
[138]

Russell, loc. cit.
[139]

Cf. evidence of Prof. Foxwell, Q. 23,876, Royal Commission on Agricultural Depression in England, 1892.
[140]

For which cf. Russell, op. cit., p. 46.
[141]

An honourable exception must be made in the case of Dr. Mees, the representative of Holland, who drew attention to the harm likely to result from this resolution.
[142]

For a history of the movement for the unification of German currency prior to 1870, cf. H. P. Willis, “The Vienna Monetary Treaty of 1857,” in the Journal of Political Economy, Vol. IV, p. 187 et seq.
[143]

For the text of the Laws, see Appendix to History of Bimetallism, by Prof. J. L. Laughlin, New York, 1886,
[144]

Cf. Report of the Committee on the Depreciation of Silver, 1876, p. xxix.
[145]

Laughlin, op. cit., p. 155.
[146]

The quotas fixed at the Conferences for the several members of the Union were:—

In Millions of Francs.

1874.

1875.

1876.

France

60

75

54

Belgium

12

50

36

Italy

40

15

10

Switzerland

8

10

7

Greece

—

—

3

?

?

?

120

150

110

In 1874 Italy was allotted an extra 20 million francs. Ibid., p. 155.
[147]

She was allowed to coin 10 millions of them.
[148]

Ibid., p. 158.
[149]

Report of the Directors of the Mint, Washington, 1893, p. 23.
[150]

Cf. P. Willis, “Monetary Reform in Russia,” in the Journal of Political Economy, Vol. V, p. 291.
[151]

Cf. F. Wieser, “Resumption of Specie Payment in Austria-Hungary,” in Journal of Political Economy, Vol. I, pp. 380–7.
[152]

This measure was the subject of a strange controversy. The gold men argued that it was deliberately adopted, while the silver men decried it as a surreptitious act due to a “combination of rascally contrivance and rascally connivance.” Prof. Laughlin has well cleared the mystery surrounding this Act. He shows by reference to debates in Congress on the legislation of 1853 that Congress knew that by refusing to alter the ratio between gold and silver it was placing the country on a gold standard. Too much consideration, he thinks, has been wasted on the Act of 1873, which merely took legal notice of the consequences of the Act of 1853. Cf. his History of Bimetallism, pp. 80 and 93–95.
[153]

The table is based on figures of M. de Foville of the French Mint, as given by Mr. F. B. Forbes in The Bimetallist of July, 1897, pp. 125–28.
[154]

In view of this, it is a matter of some surprise that such an eminent economist as Prof. W. Lexis should have ceased to be bimetallist on the ground that the enormous increase of silver militated against the establishment of a permanently high ratio with gold. Cf. his essay on “The Present Monetary Situation,” in the Economic Studies of the American Economic Association, 1896, Vol. I, No. 4, pp. 273–77. The habit of measuring the production of silver in terms of value is no doubt largely responsible for this quite unfounded notion.
[155]

Cf. H. S. Foxwell, “Bimetallism: Its Meaning and Aims,” in The (Oxford) Economic Review (1893), Vol. III, p. 302.
[156]

For these ratios, see Appendix, Table B, to A Colloquy on Currency, by H. H. Gibbs.
[157]

Theory of Political Economy, 4th ed., 1911, pp. 134–36.
[158]

It is this artificiality of the bimetallic system which unfortunately befogs the minds of some people and prejudices those of others. Some do not understand why the price determination of two commodities used as money should be so different from the price determination of any other two commodities as to be governed by a ratio fixed by law. Others are puzzled as to why, if gold and silver are a pair of substitutes, should they require a legal ratio while other pairs of substitutes circulate without a legal ratio, merely on the basis of the ratio of their utility. These difficulties are well explained away by Prof. Fisher thus:

“… two forms of money differ from a random pair of commodities in being substitutes. Two substitutes proper are regarded by the consumer as a single commodity. Thus lumping together of the two commodities reduces the number of demand conditions, but does not introduce any indeterminateness into the problem because the missing conditions are at once supplied by a fixed ratio of substitution. Thus if ten pounds of cane sugar serve the same purpose as eleven pounds of beet-root sugar, their fixed ratio of substitution is ten to eleven. … In these cases the fixed ratio is based on the relative capacities of the two commodities to fill a common need, and is quite antecedent to their prices. … The substitution ratio is fixed by nature, and in turn fixes the price ratio.

“In the single case of money, however, there is no fixed ratio of substitution. … We have here to deal not with relative sweetening power, nor relative nourishing power, nor with any other capacity to satisfy wants—no capacity inherent in the metals and independent of their prices. We have instead to deal only with relative purchasing power. We do not reckon a utility in the metal itself, but in the commodities it will buy. We assign their respective desirabilities or utilities to the sugars … before we know their prices, but we must inquire the relative circulating value of gold and silver before we can know at what ratio we ourselves prize them. To us the ratio of substitution is incidentally the price ratio. The case of the two forms of money is unique. They are substitutes, but have no natural ratio of substitution, dependent on consumers' preferences.

“The foregoing considerations … are overlooked by those who imagine that a fixed legal ratio is merely superimposed upon a system of supply and demand already determinate, and who seek to prove thereby that such a ratio is foredoomed to failure … the … analogy … is unsound. … Gold and silver … are not completely analogous even to two substitutes, because for two forms of money there is no consumers' natural ratio of substitution. There seems, therefore, room for an artificial ratio. …”—Purchasing Power of Money. 1911. pp. 376–77.
[159]

Elementary Principles of Economics, 1912, pp. 228–29. In the illustrations given by Prof. Fisher he appears, although he does not mean it, to make the success or failure of bimetallism hang upon the question whether or not the two metals are maintained in circulation. For in illustration which he gives to show the failure of bimetallism—Fig. 14 (b)—his film f shows gold to be entirely thrown out of circulation; while in the illustration he gives to show the success of bimetallism—Fig. 15 (b)—his film f shows gold to be only partially thrown out of circulation. But there seems to be no reason to suppose that there cannot be a third possibility, namely, that while the position of the film f is as in Fig. 14 (b) the level of the gold bullion and silver bullion may be as in Fig. 15 (b)—a possibility in which bimetallism succeeds although one of the two metals is entirely pushed out of circulation. For the success of bimetallism it is not necessary that both the metals should remain in circulation. Its success depends upon whether or not the compensatory action succeeds in restoring the relative values of the two bullions to that legally established between the two coins. If it succeeds in achieving that, the ratio would be preserved even if the compensatory action drives one metal entirely out of circulation.
[160]

Investigations, etc. (ed. Foxwell), p. 317.
[161]

Fisher, Purchasing Power of Money, 1911, pp. 134–35.
[162]

Since the Reform Act of 1920 that part of this cost which was “political” has been placed upon the British Estimates.
[163]

Compiled from figures in Appendix II, p. 270, of the Indian Currency Committee of 1893.
[164]

Report of the Indian Currency Committee, 1893, App. II, p. 263.
[165]

J. E. O'Conor, Report of the Indian Currency Committee, 1898, App. II, p. 182.
[166]

Cf. Report of the Public Service Commission, C. 5327 of 1887.
[167]

This clause of the statutes has been re-enacted into the statute of 1861.
[168]

Cf. evidence of Mr. Jenkins, Q. 12. Mit. of Evid. of the Select Committee on East India (Civil Servants), H. of C. 327 of 1890.
[169]

Cf. Calcutta Civil Finance Committee's Report, 1886; also The Report of the Civil Finance Commissioner (1887), who completed the work of the Committee after it was dissolved.
[170]

During the period of falling exchange the distribution of the debt of India was as follows:—

Sterling Debt.

Rupee Debt.

End of 1873–74

41,117,617

66,41,72,900

End of 1898–99

124,268,605

1,12,65,04,340

Indian Currency Committee (1898), Appendix II, p. 179.
[171]

Appendix II to the Report of the Indian Currency Committee of 1893, p. 272. These prices differ slightly from those given in Appendix IV to the First Report of the Gold and Silver Commission, 1886, and also from those in the Statistics of British India (First Issue) for 1906–07, Part IV, (a) Finance Tables 7 and 8 of the division called Prices.
[172]

Cf. Financial Statement, 1876–77, p. 94.
[173]

See C. 4868 of 1886, p. 8.
[174]

Cf. The Report of the Famine Commission of 1880, Part II, C. 2735 of 1880, pp. 175–76.
[175]

As was explained by Mr. Waterfield before the Select Committee on East India (Civil Servants), H.C. Return 327 of 1890, Q. 1905–17, it was first instituted in 1824 and was arrived at as follows: In December of each year a calculation was made at the India Office of the cost of sending a rupee to India, based on the market price of silver in London, and of the cost of bringing a rupee from India, based on the price of bills on London in Calcutta. A mean between the two was struck and taken as the adjusting rate for the coming official year between the India Office and the British Treasury in regard to such transactions or payments undertaken by one Government as the agent of the other. It was fixed anew for each and formed a fair average rate, although it was sometimes above and sometimes below the market rate of exchange.
[176]

Ibid., Q. 1925–26,
[177]

Cf. F.S. 1887–8, pp. 39–40. This cost was as follows:

1874–75

Rs. 6,400,000

1885–86

Rs. 4,00,000

1884–85

Rs. 18,43,000

1886–87

Rs. 5,15,000
[178]

Cf. Report of the Indian Currency Committee, 1893, App. I, pp. 185–90 and p. 202, for memorials of the European Civil Servants.
[179]

Cf. Col. Hughes-Hallett, M.P., The Depreciation of the Rupee: its Effect on the Anglo-Indian Official—the Wrong and the Remedy, London, 1887, p. 14.
[180]

The connection between the rapacious conduct of the early European Civil Servants and the smallness of their salaries was well brought out by Clive in his speech dated March 30, 1772, during the course of the debate in the House of Commons on the East India Judicature Bill, Hansard, Vol. XVII, pp. 334–39.
[181]

Report by Dunraven, Farrer, Muntz, and Lubbock in the Final Report of the Royal Commission on Depression of Trade and Industry, par. 54, C. 4893,
[182]

Final Report of the Royal Commission on Agricultural Depression in England, C. 8540 of 1897, par. 28,
[183]

From Appendix II (Nos. 1 and 2) to the Report of the Indian Currency Committee of 1898.
[184]

The figures for India are calculated from the Statistical Abstract for British India, Second Number (1857–1866), Table No. 34, and the Eighth Number (1864–1873), Table No. 24. Figures for England are taken from Appendix C (Statement 6) to the First Report of the Royal Commission of the Depression of Trade and Industry, 1885, with this alteration—that the separate figures in the original under “Manufactured” and “Partially Manufactured” are here grouped under “Manufactured.” The “Unclassified Articles” under Indian Exports are for the most part “Jewellery.”
[185]

From Ranade's Essays on Indian Economics, p. 104.
[186]

Cf. The Final Report of the Royal Commission on Gold and Silver Part I, pars. 99–101, for a summary of the argument.
[187]

The distribution of Indian trade during this period was as follows:—

Distribution of Indian Trade

Annual Average for each Quinquennium in Millions of Rupees.

Countries

1875–76 to 1879–80.

1880–81 to 1884–85.

Imports.

Exports.

Total.

Imports.

Exports.

Total

United Kingdom

323·68

278·15

601·83

434·45

344·22

778·67

China

14·05

132·27

146·32

19·23

134·94

154·17

Japan

·02

·33

·35

·19

2·09

2·28

Ceylon

5·74

22·97

28·71

5·35

16·37

21·72

Straits Settlements

10·83

26·11

36·94

15·88

33·65

49·53

Annual Average for each Quinquennium in Millions of Rupees.

Countries

1885–86 to 1889–90.

1890–91 to 1894–95.

Imports.

Exports.

Total.

Imports.

Exports.

Total

United Kingdom

510·47

360·59

871·06

526·24

338·40

864·64

China

21·64

134·54

156·18

28·69

133·30

161·90

Japan

·25

7·27

7·52

1·51

14·44

15·95

Ceylon

5·86

20·56

26·42

6·42

31·18

37·60

Straits Settlements

20·09

42·54

62·63

23·32

52·66

75·88
[188]

See the evidence and memoranda by Profs. Marshall and Nicholson before the Royal Commission on Gold and Silver (1886); also Prof. Lexis, “The Agio on Gold and International Trade,” in the Economic Journal, Vol. V, 1895.
[189]

Cf. figures for imports of silver in Chap. I. It will, however, be noted how closely the flow of silver into India between 1872 and 1893 followed the fall in gold price of silver.
[190]

Col. (2) is from Appendix II, Table No. 2 of the I.C.C. of 1898. Cols (3), (5), (6), and (7) are from Atkinson's “Silver Prices in India,” in the Journal of the Statistical Society, March, 1897. Col. (8) is based on the figures given by W. T. Layton in his Introduction to the Study of Prices (1912), Table I, Col. 1, p. 150, re-scaled to 1871 as 100.
[191]

See infra, Chap. IV.
[192]

Financial Statement, 1883–84, p. 26.
[193]

Evid. I.C.C., 1898, Q. 6,290, 9,808–10.
[194]

Compiled from figures given in the Final Report of the Gold and Silver Commission, p. 40, and in App. II, p. 270, to the Report of the Indian Currency Committee, 1893.
[195]

Cf. Harris, An Essay upon Money and Coins (reprinted by J. R. McCulloch in his volume of Scarce Tracts on Money, Part I, Chap. IT, par. 21; Part II, Chap. II, pars. 11, 13, and 20).
[196]

Cf. his speech dated May 6, 1844, delivered during the Commons debates on the Bank Charter Act. Hansard, Vol. XXXIV, p. 720.
[197]

Printed as Appendix I, No. 12, to the Report of the Indian Currency Committee of 1898.
[198]

Nevertheless, he said, “I would not object to make the sovereign a legal tender for 10 rupees and 4 annas. But, the sovereign being worth 10 rupees and a fraction over, there might be some slight trouble of calculation in changing it for silver, and this would be a drawback in respect of the use of the sovereign as currency in India. And if this objection were urged, I would not press for the sovereign being declared legal tender. But we should continue, under any circumstances, to receive the sovereign in our Treasuries at the present rating.”
[199]

This was a ratio of 15: 1, which was a slight undervaluation of gold.
[200]

Supra, Chap. I.
[201]

Lord Northbrook, who was the Viceroy of India when this proposal was made, in his evidence before the I.C.C. of 1898, Q. 8,447, suggested that the reason for his not adopting it then was that “that was a time when gold was appreciating, and it was impossible to do.” This is, of course, historically untrue except on the hypothesis that the proposal came for consideration long after it was submitted.
[202]

He had previously taken part in the agitation for the introduction of a gold standard in India during the sixties with the sovereign as the unit. But that was as an advocate of the movement for uniformity of international coinage. Cf. his Remarks on a Gold Currency for India and Proposal of Measures for the Introduction of the British Sovereign, etc., etc., London, 1868.
[203]

London, Effingham Wilson, 1876.
[204]

This was calculated to make the rupee-sterling exchange 2s. gold. The average rupee-sterling exchange in 1876 was about 1s. 9·645d. This would have placed a small premium on gold which would have no doubt soon disappeared owing to the appreciation of the rupee consequent upon the stoppage of its coinage.
[205]

P. 93.
[206]

Cf. The Resolution of the Government of India relating to the Depreciation in the Value of Silver, dated September 22, 1876, par. 6. Commons Paper 449 of 1893.
[207]

Ibid.
[208]

Ibid., par. 16.
[209]

Money and Monetary Problems, 1895, p. 90.
[210]

P.P., C. 4868 of 1886, p. 18.
[211]

It was composed of Louis Mallet, Edward Stanhope, T. L. Seccombe, R. E. Welby, T. H. Farrer, R. Giffen, and A. J. Balfour.
[212]

For Report of the Committee, see Commons Paper C. 4868 of 1886, p. 26.
[213]

Q. 10,025–50.
[214]

So novel was the idea at the time that the United States Monetary Commission, 1876, was surprised when some of the witnesses expressed themselves in favour of regulating the principal metallic unit of account in the currency system of a country by Governmental agency. See 44 Congress 2nd Session Senate Document, No. 703, pp. 47–48.
[215]

Cf. his Some Articles on the Depreciation of Silver, and on Topics connected with it, London, 1877, pp. 10, 65, and 80; also his evidence before the Select Committee on the Depreciation of Silver, Lords Paper 178 of 1876, Q. 1,361–1,450.
[216]

This argument was prominently put forth in the Report (pp. xxx-xxxv) of the Select Committee on the Depreciation of Silver, 1876; and also by Monometallic Members of the Gold and Silver Commission, 1886. Cf. pp. 77–79 of the Final Report, Part II.
[217]

Cf. evidence of Professor Marshall before the Gold and Silver Commission, 1886, Q. 10,164~76.
[218]

Cf. his reply to the Circular of the Gold and Silver Commission, 1886. Second Report, App. VII (1), p. 254.

Op. cit., p. 354.

[220]

Report of the Monetary Commission of the Indianapolis Convention, Chicago, 1898, pp. 138–145.
[221]

Cf. the speech of Prof. Pierson, Delegate of the Netherlands at the International Monetary Conference of 1881, Report of the Delegates of the United States, Cincinnati, 1881, pp. 77–84.
[222]

The figures are as given by Ottomar Haupt (London: Effingham, Wilson & Co., 1892, p. 160.)
[223]

Report on the Introduction of the Gold-exchange Standard into China and other Silver-using Countries by the Commission on International Exchange, 58th Congress, 2nd Session, House of Representatives Document, No. 144, Washington, 1903, p. 101.
[224]

Table submitted to the Paris International Monetary Conference of 1881 by M. Pierson, Delegate for the Netherlands.
[225]

Cf. Contemporary Review for March, 1887. It is interesting to note that essentially the same plan was suggested 115 years before Prof Marshall by James Stewart when his advice was sought by the East India Company as to the method of reforming the then chaotic currency of Bengal. He refrained from pressing it upon the Company because he thought “mankind were not all philosophers.” Cf. his Principles of Money as applied to the Present State of the Coin of Bengal (2nd Edition, 1772), pp. 8–11; cf. also William Ward, On Monetary Derangements, in a Letter addressed to the Proprietors of Bank Stock, London, 1840, p. 8.
[226]

Cf. Prof. Foxwell, Oxford Economic Review, 1893, Vol. III, p. 297.
[227]

Cf. the reply by Prof. Cannan, ibid., p. 457.
[228]

Money and Mechanism of Exchange, 1890, p. 1423.
[229]

Cf. The Report of the Indian Delegates to the International Monetary Conference of 1881, C. 3229 of 1882, p. 7; also Russell, op. cit., pp. 374–5.
[230]

P.P.C, 3229 of 1882, p. 33 et seq.
[231]

Ibid., p. 37.
[232]

Dated February 2, 1886, see C. 4868 of 1886, p. 5 et seq.
[233]

Cf. the despatch of September 4 1886, App. II to the First Report of the Royal Commission on Gold and Silver, 1886.
[234]

Cf. the evidence before the Gold and Silver Commission of 1886 of Mr. S. Smith, Q. 4,825–30; also of Mr. Watney, Q. 9,427.
[235]

Cf. The Report of the Indian Delegates, p. 12.
[236]

Cf. the speech of Mr. Goschen at the International Monetary Conference of 1878, Third Session. Report of the American Delegates, Senate Executive Document, No. 58, Forty-fifth Congress, Third Session, Washington, 1879, pp. 50–52.
[237]

Cf. for the variety of plans suggested at the Conferences The Report of the American Delegates to the International Monetary Conference of 1892, Washington, 1893.
[238]

Cf. Russell, op. cit., p. 410; also Prof. F. A. Walker, “The Free Coinage of Silver,” in The Journal of Political Economy (Chicago), Vol. I, p. 174.
[239]

So evident was this the case that the London Times, although it did not agree that any change was then urgently called for, yet observed in the leading article in its issue of October 25, 1876, p. 9, cl. 2: “The Governor-General in Council dismisses the suggestion of a gold standard on the ground that the present condition of affairs, bad as it is, does not call for so costly a remedy; but this involves a misconception of the proposal. The substitution of a gold for a silver currency in India would be a most extensive and costly operation, but to refuse to coin silver and to offer to coin gold for all comers would involve no cost beyond that of new machinery. If it was announced that after a certain day the coinage of silver was suspended, and that gold could be coined instead, for whoever might bring it, in coins that would be exchangeable for rupees at a fixed rate, there would be introduced into India the bimetallic system prevailing in France, and a change in the currency would be gradually introduced. At first no gold would be brought to be coined, but as the suspense of the coinage of silver operated to raise the value of the rupees in existence to the par value defined by the fixed rate of exchange of rupees and gold, gold would be more and more brought to the Mint, and would find its way into circulation. The process would be automatic and not costly, but it would be extremely slow, etc.”
[240]

By Aston and also by R. West, I.C.C., 1893. App. III, pp. 281 and 325.
[241]

By Atkins, ibid., p. 282.
[242]

By Chapman, ibid., p. 282.
[243]

By Woodhouse, ibid., p. 33.
[244]

By Graham, ibid., p. 305.
[245]

By M. Schilizzi, ibid., 319.
[246]

By Stalkartt, ibid., p. 322; also a very similar one by Merington, ibid., p. 316.
[247]

By Perry, ibid., p. 323.
[248]

By Claremont Daniell, ibid., p. 292.
[249]

Sir David Barbour, The Standard of Value, 1912, pp. 202–3. Italics not in the original.
[250]

Report, par. 93.
[251]

Report, par. 155.
[252]

Report, par. 156.
[253]

These sections also contained provisions for the coinage of all gold brought to the Mints for the purpose by private persons. The quantity brought to the Mints was quite trifling, and the gold coins, i.e. the mohurs struck, were not legal tender. As they were to be superseded by sovereigns to be coined at the Mints upon their being subsequently thrown open to the free coinage of gold, it was thought undesirable that any more of these mohurs should be coined. Consequently, along with silver, Mints were also closed to gold.
[254]

The repeal of these sections of the Act also called for the repeal of other sections depending upon them, such as Sections 14 and 15 and alterations in Sections 21 and 28, to bring the whole Act in accord with the policy of a gold standard then inaugurated.
[255]

The Convention had come to an end and the retention of the clause was therefore unnecessary.
[256]

The retention of this clause would have been inconsistent with the closure of the Mints.
[257]

As gold was to be the future standard of India, this limitation was no longer necessary.
[258]

Cf. Correspondence respecting the Proposals on Currency made by the Special Envoys from the United States, P.P.C. 8667 of 1897, p. 3.
[259]

Cf. letter dated October 16, 1897, to the Foreign Office, ibid., p. 15.
[260]

Despatch dated September 16, 1897, to the Secretary of State, ibid., p. 9. Italics not in the original.
[261]

By Notification No. 2664 of 1893, notes could be issued against gold only to the Comptroller-General.
[262]

Cf. the speech of the Hon. Sir James Westland introducing the Bill, dated January 14, 1898.
[263]

Cf. correspondence respecting the Proposals on Currency made by the Government of India, C. 8840 of 1898, p. 3.
[264]

See supra.
[265]

Cf. his Indian Coinage and Currency, Effingham Wilson, London, 1897, passim, particularly p. 121. Also the summary by Lindsay in the Economic Journal, Vol. VII, pp. 574–75.
[266]

The earliest elaboration of his plan is to be found in his article in the Calcutta Review for October, 1878, under the title, “A Gold Standard without a Gold Coinage in England and India,” and the latest, in his pamphlet called Ricardo's Exchange Remedy, Effingham Wilson, 1892. The plan was further developed in the newspaper Pioneer of Allahabad (India), dated January 6, 1898, full extracts from which are given in C. 8840 of 1898, p. 13.
[267]

Mr. Lindsay contemplated that when the demand for gold drafts on London became so great as to indicate the necessity, the volume of the rupee currency should be contracted by melting down the rupees and selling the silver for gold to be deposited in the London “Gold Standard” Office.
[268]

Report of the Committee appointed to inquire into the Indian Currency, P.P.C. 9390 of 1899, p. 15.
[269]

See despatch dated July 25, 1899, No. 140 (Financial), C. 9421 of 1899.
[270]

Cf. the speech of the Hon. Mr. Dawkins on the Indian Coinage and Paper Currency Bill, dated September 8, 1899.
[271]

Cf. H. of C. Return 495 of 1913, p. 14.
[272]

Cf. Principles of Economics, Vol. I, p. 569.
[273]

It was owing to this want of faith that Germany took away, by the law of October 1, 1907, the full legal-tender power from her silver thalers. In the United States the silver dollar is not legal tender if it is specifically excluded by the terms of a contract. Cf. A. C. Whitaker, Foreign Exchange, Appleton, New York, 1920, pp. 8 and 477.
[274]

Cf. F. W. Taussig, Principles, 2nd ed., 1918, p. 280.
[275]

The Bank of England notes were made legal tender by Lord Althorpe's Act of 1833.
[276]

Report, P.P.Cd. 7068 of 1913, p. 13.
[277]

See Chap. IV, supra.
[278]

The rupee branch has been discontinued since that date, on the recommendation of the Chamberlain Commission.
[279]

Besides, if the Government falls short of rupees, it has the legal power to convert the gold in the paper-currency reserve into rupees to replenish the stock.
[280]

Report, par. 46.
[281]

See supra, Chap. IV.
[282]

Cf., however, R. G. Hawtrey, Currency and Credit, 1919, pp. 302–3.
[283]

Some witnesses before the Lords Committee on Cash Payments, appointed in 1819, raised doubts whether, having regard to the silver clause of the Act of 1816, resumption of cash payments was worth while as a means of establishing a gold standard in England. Cf. particularly the evidence of Mr. Fletcher and also Mr. Mushet before the Committee.
[284]

See P.P. 400 of 1912.
[285]

From this point of view the proposition of Prof. Keynes, that the gold value of the rupee may be fixed irrespective of the cost price of silver, must, having regard to the existing system of currency, be looked upon as a somewhat unsafe position. Cf. his evidence before the Indian Currency Committee of 1919, Q. 2,688.
[286]

The danger involved in this indefinite liability to issue rupee currency was recognized by the Smith Currency Committee of 1919, which recommended that this obligation should be withdrawn. See Report, par. 68. Of course its motive was different.
[287]

Report, par. 182.
[288]

Currency and Credit, 1919, p. 341.
[289]

Report, par. 46.
[290]

Keynes, Indian Currency and Finance, p. 29.
[291]

Cf. his review of Keynes in the Quarterly Journal of Economics, February, 1914, p. 374.
[292]

Cf. AndrÉadÈs, History of the Bank of England, p. 198.
[293]

“No single word can convey the full meaning,” says Prof. Nicholson, War Finance, 2nd ed., 1918, p. 36.
[294]

A History of American Currency, New York. 1874, p. 116.
[295]

The Finance Member of the Viceroy's Council, in his Financial Statement for 1908–09 (p. 23, italics not in the original), observed:— “Had we complied with the demand for issues [of gold] without limit, the whole available supply might have been drawn off in a few weeks. … For these reasons we decided to stand by our legal rights. We are not bound to give sovereigns in exchange for rupees except at our own convenience. The currency offices were accordingly instructed not to issue gold in larger quantities than £10,000 to any individual on any one day.” These words were used to explain the attitude of the Government regarding its sense of obligation as to convertibility of the rupee in the exchange crisis of 1907! The degree of convertibility being a matter of administrative discretion it is difficult to define the extent to which it is given effect to in practice. Official evidence is inclined to impress upon the public that practically the rupee is convertible. If that is so, why not make it legally convertible. For, if convertibility is complete in practice a legal convertibility cannot impose upon the Government greater obligations than what the official evidence suggests the Government to be actually assuming. It is said that Government does not do so because it is afraid that exchange speculators will take advantage of it. By why should they not? Are they not holders of rupees? It does not, however, appear to have been adequately realized that this defence implies that the currency is issued so much beyond the point of “saturation” that its value is always on the margin of being affected by an element of speculation.
[296]

For reasons giving rise to a premium on gold in terms of the rupee, see Chap. VI. For reasons explaining how there can be a general depreciation of the rupee without there being a specific depreciation of it in terms of gold, see end of Chap. VI and beginning of Chap. VII.
[297]

Both Lindsay and Probyn had attacked the plan of the Government of India on this score, and had claimed that their plans were superior because they had at least provided some sort of convertibility.
[298]

In his comparison of the Limping Standard with the Exchange Standard, Prof. Fisher seems entirely to overlook these considerations. Cf. his Purchasing Power, etc., 1911, pp, 131–32.
[299]

Cf. Hawtrey, R.G., op. cit., Chap. I.
[300]

It is difficult to understand why some writers on Indian currency do not like to admit this fact. Cf. the discussion on Mr. Madan's paper at the annual meeting of the Indian Economic Association (Indian Journal of Economics, Vol. III, Part 4, Serial No. 12, p. 560). It is true the debasement of the rupee is not so obvious as it would have been had it taken the form of continuing the weight and making it baser, or of preserving the same fineness and making it lighter. But, as Harris points out in his Essay upon Money and Coins (Part II, Chap. I, par. 8), the “altering the denominations of the coins, without making any alteration at the Mint or in the coins themselves,” “as supposing ninepence, or as much silver as there is in ninepence, should be called a shilling,” is a mode of debasement not different from that of the rupee, and is virtually the same as the other two modes of debasement. So viewed it is difficult to avoid the conclusion that the rupee is & debased coin.
[301]

Keynes, op. cit., p. 3.
[302]

Barbour, D., The Standard of Value, p. 224.
[303]

A Treatise on the Coins of the Realm (reprint of 1880), p. 135.
[304]

Cf. evidence of Prof. Marshall before the Gold and Silver Commission, 1886. Q. 10,140–50.
[305]

Report, pp. 18 and 20.
[306]

See Commons Paper 7 of 1894, East India (Currency and Sale of Bills).
[307]

Evidence of Sir H. Waterfield before the Fowler Committee, Q. 4,332–39.
[308]

Evidence of Hon. A. Arthur before the Fowler Committee. Q. 1,806–7.
[309]

Cf. Shirras, Indian Finance and Banking, p. 168.
[310]

Cf. E. W. Kemmerer, Modern Currency Reforms, 1916, pp. 349–354, 445–49, and 535–47.
[311]

See Report, P.P. Cd. 527 of 1920, par. 59.
[312]

Report, p. 41.
[313]

The formula for this computation is as follows:—

If x pence

=

1 rupee

=

11·30016 grs. fine gold,

23·22 grs. fine gold

=

1 dollar,

D dollars

=

1 pound sterling

=

240 pence.

Then x(11·30016 × 240)/(23·22 × D)

=

(11·680)/( D) pence.

Cf. Rushforth, F. V., The Indian Exchange Problem, 1921, p. 9.
[314]

The figures for the following tables are taken, unless otherwise stated, from the Report of the Price Inquiry Committee, Calcutta, 1914.
[315]

Figures for 1913 and 1914 are those of Mr. Shirras given in the Appendix to his Indian Finance and Banking. Figures in column 3 are calculated from his figures.
[316]

Index numbers of prices are taken from the League of Nations Memorandum on Currency, 1913–1921, 2nd Ed. (1922), Table VIII. Figures for circulation are taken from H. S. Jevons' The Future of Exchange and Indian Currency, 1922, p. 44. Index numbers of circulation are calculated.
[317]

Op. cit., p. 16.
[318]

Op. cit., p. 4.
[319]

Cf. Report, pp. 19–21.
[320]

Memorandum from the Government regarding Indian price movements. App. XXVIII to the Report of the Currency Committee of 1919.
[321]

From Kirkaldy's British War Finance, 1921, p. 35. Figures for 1921 are added from the Indian Paper Currency Report.
[322]

Cf. the reply of the Hon. Mr. Howard to the question of the Hon. Mr. Sinha on September 23, 1919. S.L.C.P., Vol. LVII, p. 417.
[323]

Report, par. 33.
[324]

Cf. evidence of Mr. Keynes before the Committees of 1919, Q. 2,665–68.
[325]

Cf. the speech of the Hon. Mr. Tata on the Indian Coinage (Amendment) Bill, S.L.C.P., Vol. LIX, p. 112.
[326]

In the recent discussions on the Indian exchange it has been entirely overlooked that this was the underlying motive of raising the Indian exchange to 2s. gold. But it was laid bare by the Finance Member of the Council in his speech on March 10, 1920, in the course of the debate on the resolution re Reverse Councils, S.L.C.P., Vol. LVIII, p. 1292.
[327]

The letter was published in the Times of India, November 20, 1920, p. 14, col. 6.
[328]

This Committee was appointed in 1910 to investigate into the rise of prices in India and was composed of Messrs. Datta, Shirras, and Gupta. The first and the last named commissioners being members of the Finance Department of the Government of India, the Committee may be regarded as more or less an official body. The results of its investigations appeared in 1914 in five volumes, Vol. I of which contained the Report signed by Mr. Datta.
[329]

See Report, pars. 126–27.
[330]

It may, however, be noted that this explanation of a shortage of goods, which was apparently offered as most likely to absolve the Government from any blame for having inflated the currency, was repudiated by the Government in its resolution reviewing the Report of the Committee, probably because such an admission on its part was likely to be interpreted as an argument to show that under it India was getting poorer. But the Government, in a hurry, did not realize that with the repudiation of this doctrine no other explanation was left but that of an increased issue of money to account for the rise of prices in India.
[331]

Cf. H. M. Ross, The Triumph of the Standard, Calcutta, 1909, pp. 16–17.
[332]

By Act XV of 1896.
[333]

Financial Statement, 1896–97, p. 89.
[334]

Op. cit., pp. 131–35.
[335]

For a view of the currency policy of this period the primary source are the Annual Financial Statements, for these years, of the Government of India.
[336]

On November 30,1919. The rest of the figures are for March 31.
[337]

Act XIV of 1918.
[338]

Acts IV of 1918 and XXI of 1919.
[339]

First issued on December 1, 1917.
[340]

First put into circulation on January 2, 1918.
[341]

Cf. the figures given by L. Abrahms in his evidence to the Currency Committee of 1919. Mit. of Evid., Q. 37–41.
[342]

See the very interesting discussion by Laughlin of the laws of token money in his Principles of Money, Chap. XV. It may be said in passing that Laughlin is an opponent of the quantity theory of money, but in his discussion of token money he virtually admits it.
[343]

Evidence of Mr. F. C. Harrison before the Chamberlain Commission, Q. 10,209.
[344]

Speech on the resolution re “Reverse Councils,” March 10, 1920. S.L.C.P., Vol. LVIII, p. 1291.
[345]

By Ordinance III of June 21, 1920, the gold coins referred to in Section 11 of the Indian Coinage Act (III of 1906) ceased to be legal tender in payment or on account, but provision was made for their acceptance by Government at the ratio of Rs. 15 during a moratorium of twenty-one days. This Ordinance continued till September 9, 1920, when by Act XXXVI of 1920 the sovereign was again made legal tender. During this period gold had no legal status in India.
[346]

Ibid., p. 1301.
[347]

The most notable example is that of American greenbacks. Under the law of 1875 they were by 1879 retired in sufficient numbers to restore parity with gold. But by a counter-law of 1878, 347,000,000 of them have been kept in circulation. As soon as redeemed, they must be reissued; they cannot be retired.
[348]

For figures, see Chap. VII.
[349]

Cf. Memorandum on India Office Balances, Cd. 6619 of 1913.
[350]

“We have virtually relegated our rupee currency to the position of a token currency, and we are now practically in the position of bankers who have issued a certain amount of fiduciary currency (whether paper or metal is immaterial), and to maintain the value of this fiduciary currency we are bound to be in a position to exchange it for gold when presented to meet legitimate trade requirements,” said the Financial Statement for 1903–4, p. 14.
[351]

The Chamberlain Commission said: “There are disadvantages in restricting the freedom of the Government in a crisis, and it is undesirable that the disposition and amount of the reserve should be stereotyped. … We therefore do not regard that the gold-standard reserve should be regulated by statute.”—Report, Sec. 101.
[352]

In the course of his speech on the Indian Paper Currency (Temporary Amendment) Bill, dated March 17, 1920, the Finance Minister observed: “… from a practical point of view, it is desirable to leave the gold-standard reserve until the paper-currency reserve has been re-transferred, in case … the Secretary of State finds it impossible to keep himself in funds by Councils for his heavy home liabilities. He will then be able to use the gold-standard reserve, and we can credit the gold-standard reserve out here. There is a third point, and I think a conclusive one. When you operate against the paper-currency reserve you have to operate within the paper-currency reserve; when you operate against the gold-standard reserve it disappears; it melts, and we are under no obligation to replace it; whereas we are under a statutory obligation to replace the paper-currency reserve.”—S.L.C.P., Vol. LVIII, p. 1416.
[353]

Op. cit., pp. 166–7.
[354]

In striking the proportion the rupee portion of the reserve has been omitted.
[355]

Cf. in this connection the brilliant paper by F. A. Fetter, “The Gold Reserve: its Function and its Maintenance,” in the Political Science Quarterly, 1896, Vol. XI, No. 2.
[356]

See footnote357, page 236.

In answer to Mr. M. L. Reddi Garu, the following statement was laid on the table:—

Statement showing the average cost of silver purchased by the—359

Year.

Royal Mint Average Cost for Standard Ounce.

India Office Average Cost for Standard Ounce.

Financial Year.

d.

d.

1893

36 5/16

No purchase

1893–94

1894

29¼

No purchase

1894–95

1895

30?

No purchase

1895–96

1896

30 5/16

No purchase

1896–97

1897

27?

No purchase

1897–98

1898

27¼

No purchase

1898–99

1899

27½

28

1899–1900

1900

28¼

29

1900–01

1901

27 15/16

No purchase

1901–02

1902

24 5/16

22·80

1902–03

1903

23 11/16

27·19

1903–04

1904

26½

27·14

1904–05

1905

27 7/16

29·74

1905–06

1906

31 1/16

31·59

1906–07

1907

30 9/16

31·27

1907–08

1908

24 7/16

No purchase

1908–09

1909

23 11/16

No purchase

1909–10

1910

24?

No purchase

1910–11

1911

24 13/16

No purchase

1911–12

1912

27 15/16

28·71

1912–13

1913

28 1/16

28·71

1913–14

1914

24 15/16

No purchase

1914–15

1915

24¼

33·96

1915–16

1916

30?

33·96

1916–17

1917

39 15/16

42·78

1917–18

1918

47 15/16

48·20

1918–19

1919

49?

52·04

1919–20

1920

50?

Silver purchased at special rates from the Baldwin mines and the Perth mint.

1920–21

In the absence of information whether the price is F.O.B. or C.I.F. it is difficult to say that the Secretary of State has had to pay higher prices for silver than were paid by the Master of the Royal Mint.

[358]

From 1900–1 to 1920–21 the profits on coinage credited to the gold-standard reserve amounted to £28,573,606 only: while during the same period Interest and Discount gave £13,306,847 or nearly one-half the profits on coinage. Cf. East India: Accounts and Estimates, 1921–22, Cmd, 1517 of 1921, p. 20.
[359]

Legislative Assembly Debates, Vol. II, No. 3, September, 10 1921, p. 181.
[360]

Money, p. 227.
[361]

Report, par. 63.
[362]

In 1876, when Mr. Lindsay first set out his scheme in the pages of his Calcutta Review, he mentions no parallel at all. In 1892, in his Ricardo's Exchange Remedy, he uttered the name of Ricardo as an authority for his plan, but in 1898 he shifted his ground, so much so that he blamed (Economic Journal, supra) Probyn for taking Ricardo's gold-bar plan as a basis. The reason why he disavowed Ricardo as his authority most probably lies in the fact that Ricardo's general views of currency were rather damaging to his position. In view of the fact that there are so many people who assert, no doubt, from the title of his Proposals for an Economical and Secure Currency, that Ricardo wrote against a metallic standard, it is worth while recording the following passage from his Proposals, in which he says: “During the late discussion on the bullion questions, it was almost justly contended that a currency, to be perfect, should be absolutely invariable in value. But it was said, too, that ours had become such a currency, by the Bank Restriction Bill; for by that bill we had wisely discarded gold and silver as the standard of our money … Those who supported this opinion did not see that such a currency, instead of being variable, was subject to the greatest variations—that the only use of a standard is to regulate the quantity, and by the quantity the value of the currency—and that without a standard it would be exposed to all the fluctuations to which the ignorance or the interests of the issuers might subject it.”
[363]

The Report, which is a masterly document, was eclipsed by the Bullion Report, though both contain the same doctrine, by reason of its not being printed till 1826. See Lords Paper 48 of 1826.
[364]

Report, p. 16. Italics not in the original.
[365]

See Hansard Parliamentary Debates, Vol. XIV, pp. 75–91.
[366]

Cf. the succinct statement by T. E. Gregory, Foreign Exchanges, p. 86.
[367]

See Chap. IV.
[368]

Cf. evidence of Mr. Lindsay before the Fowler Committee, Q. 4,190–95, where he asserted that exchange had nothing to do with the quantity of money in circulation.
[369]

Dodwell, “A Gold Currency for India,” Economic Journal, 1911; Report on the Enquiry into the Rise of Prices in India, 1914, p. 94.
[370]

Canning's castigation of Lord Castlereagh's definition of standard as “a sense of value” during the Bullion debates must be attributed to his ignorance on this matter.
[371]

Ricardo, in his Proposals for an Economical and Secure Currency, says: “It has indeed been said that we might judge of the value of a currency by its relation not to one but to the mass of the commodities. … Such a test would be of no use whatever. … To determine the value of a currency by the test proposed … is evidently impossible.”
[372]

Gold, Prices and Wages under the Greenback Standard, 1908, pp. 39–41.
[373]

Cf. Prof. Nicholson's Principles of Political Economy (1897), Vol. II, Chap. XV, § 4; and Walker, F. A., Money, 1878, pp. 387–91.
[374]

From Hawtrey's Credit and Currency, p. 269. On the values of the notes in terms of gold Prof. Foxwell says: “It is admitted by the severest critics of the bank that there is no substantial ground for complaint as to its conduct during the restriction until 1808–9. There does not seem, indeed, to have been any real depreciation of its paper until that date. The price of £4 per ounce, which figures monotonously for the years 1803–9, was really an arbitrary price, fixed by the bank itself as one at which it would purchase foreign gold.” Preface to AndrÉadÈs, p. xvi. Some people seem to doubt that there was no specific depreciation of the inconvertible notes of the Bank of England till 1810. Unfortunately data are not available to give direct evidence of the fact. But circumstantial evidence there is. It is to be remembered that the premium on gold was the only method then known of measuring depreciation and that Horner, Ricardo and others were open enemies of the Bank of England. That being the case, it does not seem probable that Horner would have waited to introduce his Resolution in the House of Commons till 1810 if the bank notes had shown signs of specific depreciation before that time.
[375]

The following table regarding the consumption of gold in different countries is interesting:—

Consumption of Gold (millions of pounds sterling at 85s. per fine ounce)376

1915.

1916.

1917.

1918.

1919.

1920.

Industrial Arts (Europe and America)

17·0

18·0

16·0

17·0

22·0

22·0

India (Year to March 31 following)

1·4

5·1

19·6

-3·3

27·7

5·1

China

-1·7

2·6

2·6

0·4

11·5

-3·7

Egypt

-0·8

-0·2

-0·1

-0·0

-0·0

?

Balance available as money (difference)

80·5

68·0

48·2

64·9

13·8

46·6

World

96·4

93·5

86·3

79·0

75·0

70·0
[376]

The figures are those of Mr. Joseph Kitchin in The Review of Economic Statistics, Preliminary volume 3, No. 8 for August, 1921, p.257. If figures previous to 1914 are desired, see table ibid., p. 268.)

Omitting the abnormal years of 1917 and 1919 and reducing the figures to per capita basis the consumption of gold by India must be said to be remarkably small. Besides, it is to be noted that figures for India include industrial as well as monetary consumption. Further, in making comparison account must be taken of the difference in the period taken as unit in the case of India and other countries. Of course in these days when gold is so very greatly depreciated in terms of commodities in general, neither is there any necessity to shed tears if its production were to fall off, nor can it be anything but a welcome event if its use were to be extended. It would therefore be unwise to resent an increase, if it were to take place, in the importation and use of gold by India. The greater the use of gold and the less the production of it, the better for the world as it is circumstanced to-day. Cf. in this connection the remarks of Prof. Cannan on Mr. Shirras's Paper in the J.R.S.S for July, 1920, pp. 623–24,
[377]

Evidence of Prof. Marshall, I.C.C., 1898, Q. 11,793.
[378]

Mitchell, ibid., p. 258.
[379]

Fischer, Purchasing Power of Money, 1911, p. 340.
[380]

Q. 2,690.
[381]

Perhaps an exception may be made in the case of the latter Committee; but its object was only to make it a ground for high exchange.
[382]

See supra, Chap. III.
[383]

Purchasing Power of Money, 1911, p. 128.
[384]

It is, however, to be noted that neither Prof. Kemmerer nor Prof. Keynes has set up this claim in favour of the exchange standard. If anything, both have argued against the assumption of there being equality of all prices.
[385]

“Recent Economic Events in India,” in The Economic Journal, March, 1909, p. 4. Italics not in the original.
[386]

Prof. Cassel, the modern exponent of this old doctrine of the relation of exchange rates to purchasing power parities, admits that the correspondence between the two depends upon the fulfilment of this assumption, for he says:

“Our calculation of the purchasing power parity rests strictly on the proviso that the rise in prices in the countries concerned has affected all commodities in a like degree. If that proviso is not fulfilled, then the actual exchange rate may deviate from the calculated purchasing power parities.”—Money and Foreign Exchange after 1914, London, 1922, p. 164.
[387]

Op. cit., p. 64.
[388]

This is merely re-stating what has previously been stated to explain why specific depreciation of the rupee does not immediately follow upon its general depreciation.
[389]

What follows is condensed from Mayo-Smith's “Price Movements and Individual Welfare,” in the Political Science Quarterly, Vol. XV, No. 1 (March, 1900), pp. 14–17.
[390]

Cf. “Remedies for Fluctuations of General Prices,” in The Contemporary Review, March, 1887, passim.
[391]

Op. cit., p. 36.
[392]

Gold, Prices, and Wages under the Greenback Standard, 1908, p. 27.
[393]

Purchasing Power, etc., 1911, p. 340.
[394]

Op. cit., p. 29.
[395]

Op. cit., pp. 255–56; cf. also F. A. Walker, Money in its Relationship to Trade, p. 27; and C. M. Walsh, The Fundamental Problem in Monetary Science, p. 804.
[396]

Supreme Legislative Council Proceedings, Vol. L, p. 642.
[397]

Prof. Cannan's Reprint, p. 17.
[398]

Report, pp. 15–19. The same arguments will be found in Chap. IV of Mr. Keynes's treatise.
[399]

See the Memorandum by Mr. Dalal to the Chamberlain Commission Appendices, Vol. III, No. XXXIII, pp. 673–76, for this and other cognate topics.
[400]

In the crisis of 1907–8 the Indian people were accused of this. Yet it must be noted that in that crisis some gold was exported on private account.
[401]

For an illuminating discussion on this topic, cf. Money: Its Connection with Rising and Falling Prices, by Prof. Cannan, 3rd ed., pp. 47–8.
[402]

Report, Sec. 112.
[403]

Cf. the Memorandum by Sir Henry Waterfield relating to the system of effecting remittances from India, Appendix to the Fowler Committee's Report, p. 24; also Memorandum by F. W. Newmarch on the Sale of Council Bills and Telegraphic Transfers, Appendices to the Interim Report of the Royal Commission on Indian Finance and Currency, Vol. I, No. VIII. p. 217.
[404]

There was a fourth one, viz., the Government of India purchasing sterling bills in India on London and sending them to the Secretary of State for collection. It was employed for a short period of time in 1877, but was afterwards dropped.
[405]

From January 22, 1862, when the Sale of Council Bills under the authority of the Secretary of State first took place, up to November, 1862, the sales were effected monthly. From November, 1862, the sales were effected fortnightly; and in August, 1876, they were made weekly.
[406]

From January to March, 1862, the minimum fraction was a farthing; it was reduced to ?th of a penny in March 1862, to 1/16th in January 1875, and to 1/32nd in 1882, at which fraction it has continued since then.
[407]

First introduced in 1876.
[408]

Cf. Memorandum on the Sale of Council Bills, by F. W. Newmarch, to the Chamberlain Commission, App. Vol. I, No. VII, p. 222,
[409]

See Commons Paper 495, of 1913, p. 57.
[410]

Ibid., p. 64.
[411]

Report, secs. 69–71.
[412]

The Commission recommended that if a gold Mint was not established in India Government should renew the notification withdrawn in 1906 to receive refined gold on suitable terms.—Report, sec. 72.
[413]

Report, par. 67.
[414]

See G. R. Porter, Progress of the Nation (Ed. Hirst), p. 568.
[415]

See Report of the Deputy Master of the Royal Mint, 1921.
[416]

Italics not in the original.
[417]

S.L.C.P., Vol. L, pp. 637–38. Italics not in the original.
[418]

The legal position of the Secretary of State and the extent to which he can be bound by the provisions of any law passed by the Government of India were well explained by Sir James Westland in his speech on the Indian Paper Currency (Amendment) Bill, which afterwards became Act IT of 1898; compare also the peculiar wording of that Act.
[419]

Financial Statement, 1900–1, p. 14.
[420]

Ibid., p. 19.
[421]

Ibid., p. 167.
[422]

Financial Statement, 1910–11, p. 346.
[423]

This was no other than the Hon. Fazulbhai Vishram, the well-known financier of Bombay. Cf. his speech in the Financial Statement, 1894–95, p. 96.
[424]

Ibid., p. 123.
[425]

Financial Statement, 1898–9, p. 169.
[426]

Financial Statement, 1900–1, p. 163.
[427]

Cf. his Budget speech, Financial Statement, 1900–1, p. 27.
[428]

For a copy of the Minute and the correspondence thereon, see Appendix V to the Interim Report of the Chamberlain Commission, Cd. 7070 of 1913.
[429]

Even the Chamberlain Commission said that the Government had departed from the ideal of the Fowler Committee.
[430]

Report, par. 56.
[431]

Report, pars. 57–60.
[432]

Report, par. 58.
[433]

Report, par. 70.
[434]

See the Reservations to the Report by Campbell Helland and Muir Report, p. 27.
[435]

See Chap. IV, supra, p. 147.
[436]

Report, p. 17.
[437]

Money and Credit Instruments in Relation to Prices, p. 63.
[438]

Cf. the Speech of the Finance Minister, Mr. Hailey, on the Indian Paper Currency (Amendment) Bill, dated September 16, 1920, S.L.C.P., Vol. LIX, pp. 308–9,
[439]

The Paper Pound of 1797–1821, Introduction, p. xxxix.
[440]

His speech on the Paper Currency Bill, dated February 16, 1861, S.L.C.P., Vol. VII, pp. 66–7.
[441]

During the bank suspension period in England it is to be noted that the Army and the Navy were paid in gold, for fear of causing discontent.
[442]

For a copy of it, see Commons Paper 183, of 1860, p. 1.
[443]

Resolution of the Government of India, relating to the Depreciation in the Value of Silver, dated September 22, 1870, Commons Paper 449 of 1893.
[444]

S.L.C.P., Vol. LVI, p. 35.
[445]

Cf. Financial Statement for 1908–9, p. 229.
[446]

Cf. E. R. A. Seligman, Currency Inflation and Public Debts, New York, 1022, passim.
[447]

Op. cit., p. 111.
[448]

Op. cit., p. 39.
[449]

Report, par. 66.
[450]

Such a sober politician as the late Mr. Gokhale took the lead in this matter. Cf. his speech in the Financial Statement for 1907–8, pp. 203–4; and the same indiscretion is repeated by Prof. V. G. Kale in his Currency Reform in India, 1919, p. 65.

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