Vol. 6 · pages 366–370

351 FROM A DOUBLE STANDARD TO A SILVER STANDARD Thus, without abrogating the bimetallic system, substantial steps were taken in realizing the ideal unit proposed by the Court, as may be seen from the following table. TABLE III UNIFORMITY OF COINAGE AT THE END OF AD. 1833 Issued the Government of Silver Coins Gold Coins Legal RatioDenominanation Weight Fine-ness Denomina-nation Weight Fine-ness Bengal Sicca Rupee 192 176 or 11 12 Mohur 204.710 187.651 1 to 15 Furrukabad Rupee 180 165 or 11 12 … … …… Bombay Silver Rupee 180 165 or 11 12 Gold Rupee 180 165 or 11 12 1 to 15 Madras Silver Rupee 180 165 or 11 12 ” ” 180 165 or 11 12 1 to 15 Taking stock of the position as it was at the end of 1833, we find that with the exception of the Sicca rupee and the gold mohur of Bengal, that part of the scheme of the Directors which pertained to the uniformity of coinage was an accomplished fact. Nothing more remained to carry it to completion than to discontinue the Sicca rupee and to demonetize gold. At this point, however, arose a conflict between the Court of Directors and the three Governments in India. Considerable reluctance was shown to the demonetization of gold. The Government of Madras, which was the first to undertake the reform of its currency according to the plan of the Court, not only insisted upon continuing the coinage of gold along with that of the rupee,* but stoutly refused to deviate from the system of double legal tender at a fixed ratio prevalent in its territories,† * 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.” † Cf. Fort St.George Public Consultations of August 19, 1817, particularly the letter of the Accountant-General entered thereon.

352 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES notwithstanding the repeated remonstrances addressed by the Court.* The Government of Bengal clung to the bimetallic standard with equal tenacity. Rather than demonetize the gold mohur, it took steps to alter its standard† by reducing its pure contents‡ from 189.4037 to 187.651 troy grs., so as to re-establish a bimetallic system on the basis of the ratio adopted by Madras in 1818. So great was its adherence to the bimetallic standard that in 1833 it undertook to alter§ the weight and fineness of the Sicca rupee to 196 grs. troy and 176 grs. fine, probably to rectify a likely divergence between the legal and the market ratios of the mohur to the rupee.¶ But in another direction the Government in India wanted to go further than the Court desired. The Court thought a uniform currency (i.e. a currency composed of like but independent units) was all that India needed. Indeed, they had given the Governments to understand that they did not wish for more in the matter of simplification of currency and were perfectly willing to allow the Sicca and the mohur to remain as they were, unassimilated.§§ A uniform currency was no doubt a great advance on the order of things such as was left by the successors of the Moghuls. But that was not enough, and the needs of the situation demanded a common currency based on a single unit in place of a uniform currency. Under the system of uniform currency each Presidency coined its own money, and the money coined at the Mints of the other Presidencies was not legal tender in its territories except at the Mint. This monetary independence would not have been very harmful if there had existed also financial independence between the three Presidencies. As a matter of fact, although each Presidency had its own fiscal system, yet they depended upon one another for the finance of their deficits. There was a regular system of “supply” between them, and the surplus in one was being constantly drawn upon to meet the deficits in others. In the absence of * Cf. The Public Despatches to Madras dated March 6, 1810 ; July 10, 1811 ; and June 12, 1816. † Preamble to the Bengal Regulation XIV of 1818. ‡ It, however, increased its weight from 190.895 to 204.710 troy grs. § Bengal Regulation VII of 1833. ¶ It may be that this alteration was also intended to make the Sicca rupee eleven-twelfths fine. §§Cf. Despatch to Bengal dated March 11, 1829.

353 FROM A DOUBLE STANDARD TO A SILVER STANDARD a common currency this resource operation was considerably hampered. The difficulties caused by the absence of a common currency in the way of the “supply” operation made themselves felt in two different ways. Not being able to use as legal tender the money of other Presidencies, each was obliged to lock up, to the disadvantage of commerce, large working balances in order to be self-sufficient.* The very system which imposed the necessity of large balances also rendered relief from other Presidencies less efficacious. For the supply was of necessity in the form of the currency of the Presidency which granted, it, and before it could be utilized it had to be re-coined into the currency of the needy Presidency. Besides the loss on recoinage, such a system obviously involved inconvenience to merchants and embarassment to the Government.† At the end of 1833, therefore, the position was that the Court desired to have a uniform currency with a single standard of silver, while the authorities in India wished for a common currency with a bimetallic standard. Notwithstanding these divergent views, the actual state of the currency might have continued as it was without any substantial alteration either way. But the year 1833 saw an important constitutional change in the administrative relations between the three Presidential ‡ Governments in India. In that year by an Act of Parliaments there was set up an Imperial system of administration with a centralization of all legislative and executive authority over the whole of India. This change in the administrative system, perforce, called forth a change in the prevailing monetary systems. It required local coinages to be replaced by Imperial * The Accountant-General of Bengal, in a letter to the Calcutta Mint Committee, dated November 21, 1823 wrote:— “Para. 32. The amount of the balance must also necessarily depend upon the state of the currency. If the Madras, Bombay, and Furrukabad rupees instaed 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 proporion to the increased availability of currency for the disbursements of the three Presidencies” (Bombay Financial Consultations, February 25, 1824). † 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. ‡ 3 & 4 Will, IV, c; 85.

354 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES coinage. In other words, it favoured the cause of a common currency as against that of a mere uniform currency. The authorities in India were not slow to realize the force of events. The Imperial Government set up by Parliament was not content to act the part of the Dewans or agents of the Moghuls, as the British had theretofore done, and did not like that coins should be issued in the name of the defunct Moghul emperors who had ceased to govern. It was anxious to throw off the false garb* and issue an Imperial coinage in its own name, which being common to the whole of India would convey its common sway. Accordingly, an early opportunity was taken to give effect to this policy. By an Act of the Imperial Government (XVII of 1835) a common currency was introduced for the whole of India, as the sole legal tender. But the Imperial Government went beyond and, as if by way of concession to the Court—for the Court did most vehemently protest against this common currency in so far as it superseded the Sicca rupee†—legislated “that no gold coin shall henceforward be a legal tender of payment in any of the territories of the East India Company. ” ‡ That an Imperial Administration should have been by force of necessity led to the establishment of a common currency for the whole of India is quite conceivable. But it is not clear why it should have abrogated the bimetallic system after having maintained it for so long. Indeed, when it is recalled how the authorities had previously set their faces against the destruction of the bimetallic system, and how careful they were not to allow their coinage reforms to disturb it any more violently than they could help, the provision of the Act demonetizing gold was a grim surprise. However, for the sudden volte-face displayed therein, the Currency Act (XVII of 1835) will ever remain memorable in the annals of the Indian history. It marked the culminating-point of a long and arduous process of monetary reform and placed India on a silver monometallic basis, with a rupee weighing 180 grs. troy and containing 165 grs. fine as the common currency and sole legal tender throughout the country. No piece of British India legislation has led to a greater * Cf. the sentiments of Tucker in his Memorials of Indian Government (ed. by Kaye), 1853, pp. 17-19. †Cf. their Financial Despatch to India, No. 9, dated July 27, 1836. ‡ Section 9 of Act XVII of 1835.

355 FROM A DOUBLE STANDARD TO A SILVER STANDARD discontent in later years than this Act XVII of 1835. In so far as the Act abrogated the bimetallic system, it has been viewed with a surprising degree of equanimity. Not all its critics, however, are aware* that what the Act primarily decreed was a substitution of bimetallism by monometallism. The commonly entertained view of the Act seems to be that it replaced a gold standard by a silver standard. But even if the truth were more generally known, it would not justify any hostile attitude towards the measure on that score. For, what would have been the consequences to India of the gold discoveries of California and Australia in the middle of the nineteenth century, if she had preserved her bimetallic system ? It is well known how this increase in the production of gold relatively to that of silver led to a divergence in the mint and the market ratios of the two metals after the year 1850. The under-valuation of silver, though not very great, was great enough to confront the bimetallic countries with a serious situation in which the silver currency, including the small change, was rapidly passing out of circulation. The United States† was obliged by the law of 1853 to reduce the standard of its small silver coins sufficiently to keep them, dollar for dollar, below their gold value in order to keep them in circulation. France, Belgium, Switzerland, and Italy, which had a uniform currency based on the bimetallic model of the French with reciprocal legal tender,‡ were faced with similar difficulties. Lest a separatist policy on the part of * To mention only one, cf. S. V. Doraiswami, Indian Currency, Madras, 1915. passim. † Laughlin, J. L, History of Bimetallism, New York, 1886, pp. 79-83. ‡ 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.