Vol. 6 · pages 376–380

361 FROM A DOUBLE STANDARD TO A SILVER STANDARD of the most sweeping character. As territory after territory passed under the sway of the British, the first step taken was to substitute in place of the rural militia of the feudatories a regularly constituted and a well-disciplined standing army located at different military stations, paid in cash ; in civil employ, as in military, the former revenue and police officers with their followers, who paid themselves by perquisites and other indirect gains received in kind, were replaced by a host of revenue collectors and magistrates with their extensive staff, all paid in current coin. The payments to the army, police, and other officials were not the only payments which the British Government had placed on a money basis. Besides these charges, there were others which were quite unknown to the native Governments, such as the “Home Charges” and “ Interest on Public Debt,” all on a cash basis. The State, having undertaken to pay in cash, was compelled to realize all its taxes in cash, and as each citizen was bound to pay in cash, he in his turn stipulated to receive nothing but cash, so that the entire structure of the society underwent a complete transformation. Another important change that took place in the economy of the Indian people about this time was the enormous increase of trade. For a considerable period, the British tariff policy and the navigation laws had put a virtual check on the expansion of Indian trade. England compelled India to receive her cotton and other manufactures at nearly nominal (2½ per cent.) duties, while at the same time she prohibited the entry of such Indian goods as competed with hers within her territories by prohibitory duties ranging from 50 to 500 per cent. Not only was no reciprocity shown by England to India, but she made a discrimination in favour of her colonies in the case of such goods as competed with theirs. A great agitation was carried on against this unfair treatment,* and finally Sir Robert Peel admitted Indian produce to the low duties levied by the reformed tariff of 1842. The repeal of the navigation laws gave further impetus to the expansion of Indian commerce. Along with this, the demand for Indian produce had also been growing. The Crimean War of 1854 cut off the Russian supplies, the place of which was taken * 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).

362 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES by Indian produce, and the failure of the silk crop in 1853 throughout Europe led to the demand for Asiatic, including Indian, silks. The effect of these two changes on the currency situation is obvious. Both called forth an increased demand for cash. But cash was the one thing most difficult to obtain. India does not produce precious metals in any considerable quantity. She has had to depend upon her trade for obtaining them. Since the advent of the European Powers, however, the country was not able to draw enough for the precious metals. Owing to the prohibitions on the export of precious metals then prevalent in Europe,* one avenue for obtaining them was closed. But there was little chance of obtaining precious metals from Europe, even in the absence of such prohibition ; indeed, precious metals did not flow to India when such prohibitions were withdrawn.† The reason of the check to the inflow of precious metals was well pointed out by Mr. Petrie in his Minute of November, 1799, to the Madras Committee of Reform.‡ According to Mr. Petrie, the Europeans before they acquired their territorial possessions “purchased the manufactures of India with the metals of Europe : but they were henceforward to make these purchases with gold and silver of India, the revenues supplied the place of foreign bullion and paid the native the price of his industry with his own money. At first this revolution in the principles of commerce was but little felt, but when opulent and extensive dominions were acquired by the English, when the success of war and commercial rivalship had given them so decided a superiority over the other European nations as to engross the whole of the commerce of the East, when a revenue amounting to millions per annum was to be remitted to Europe in the manufactures of the East, then were the effects of this revolution severely felt in every part of India. Deprived of so copious a stream, the river rapidly retired from its banks and ceased to fertilize the adjacent fields with overflowing water.” The only way open, when the prohibitions were withdrawn * 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 Caesar, London, 1660, p. 26. † 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 ” ” ” ‡ For the proceedings of the Committee, see India Office Records, “ Home Miscellaneous” Series, Vol. 456.

363 FROM A DOUBLE STANDARD TO A SILVER STANDARD to obtain precious metals, was to send more goods than this amount of tribute, so that the balance might bring them in. This became possible when Peel admitted Indian goods to low tariff, and the country was for the first time able to draw in a sufficient quantity of precious metals to sustain her growing needs. But this ease in the supply of precious metals to serve as currency was shortlived. The difficulties after 1850, however, were not due to any hindrance in the way of India’s obtaining the precious metals. Far from being hindered, the export and import of precious metals was entirely free, and India’s ability to procure them was equally great. Neither were the difficulties due to any want of precious metals ; for, as a matter of fact, the increase in the precious metals after 1850 was far from being small. The difficulty was of India’s own making, and was due to her not having based her currency on that precious metal, which it was easy to obtain. The Act of 1835 had placed India on an exclusive silver basis. But, unfortunately, it so happened that after 1850, though the total production of the precious metals had increased that of silver had not kept pace with the needs of the world, a greater part of which was then on a silver basis, so that as a result of her currency law India found herself in an embarrasing position of an expanding trade with a contracting currency, as is shown in the Table IV on page 364. On the face of it, it seems that there need have been no monetary stringency. The import of silver was large, and so was the coinage of it. Why then should there have been any stringency at all ? The answer to this question is not far to seek. If the amount of silver coined had been retained in circulation it is possible that the stringency could not have arisen. India has long been notoriously the sink of the precious metals. But in interpreting this phenomenon, it is necessary to bear in mind the caution given by Mr. Cassels that “its silver coinage has not only had to satisfy the requirements of commerce as the medium of exchange, but it has to suply a sufficiency of material to the silversmith and the jeweller. The Mint has been pitted against the smelting-pot, and the coin produced by so much patience and skill by the one has been rapidly reduced into bangles by the other.”* * 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.

364 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES TABLE IV* TRADE AND CURRENCY Years Merchandise. Treasure.Net Imports of Total Coinage of Excess (+) or Defect (—) of Coinage on Net Imports of Annual Production (in £, 00,000 omitted) of Imports. £ Exports. £ Silver. £ Gold. £ Silver. £ Gold. £ Silver. £ Gold. £ Gold. Silver. 1850-51 11,558,789 18,164,150 2,117,225 1,153,294 3,557,906 123,717 + 1,440,681 -1,029,577 8,9 7,8 1851-52 12,240,490 19,879,406 2,865,357 1,267,613 5,170,014 62,553 + 2,304,657 -1,205,060 13,5 8,0 1852-53 10,070,863 20,464,633 3,605,024 1,172,301 5,902,648 Nil + 2,297,624 -1,172,301 36,6 8,1 1853-54 11,122,659 19,295,139 2,305,744 1,061,443 5,888,217 145,679 + 3,582,473 - 915,764 31,1 8,1 1854-55 12,742,671 18,927,222 29,600 731,490 1,890,055 2,676 + 1,860,455 - 728,814 25,5 8,1 1855-56 13,943,494 23,038,259 8,194,375 2,506,245 7,322,871 167,863 + 871,504 -2,338,382 27,0 8,1 1856-57 14,194,587 25,338,451 11,073,247 2,091,214 11,220,014 128,302 + 146,767 -1,962,912 29,5 8,2 1857-58 15,277,629 27,456,036 12,218,948 2,783,073 12,655,308 43,783 + 436,360 -2,739,290 26,7 8,1 1858-59 21,728,579 29,862,871 7,728,342 4,426,453 6,641,548 132,273 -1,086,794 -4,294,180 24,9 8,1 1859-60 24,265,140 27,960,203 11,147,563 4,284,234 10,753,068 64,307 - 394,495 -4,219,927 25,0 8,2 * Prepared from figures given in Report 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 calander years, are added from the “Silver Question and the Gold Question,” by R. Barclay.

365 FROM A DOUBLE STANDARD TO A SILVER STANDARD Now it will be seen from the figures given that all the import of silver was coined and used up for currency purposes. Very little or nothing was left over for the industrial and social consumption of the people. That being the case, it is obvious that a large part of the coined silver must have been abstracted from monetary to non-monetary purposes. The hidden source of this monetary stringency thus becomes evident. To men of the time it was as clear as daylight that it was the rate of absorption of currency from monetary to non-monetary purposes that was responsible as to why (to quote from the same authority) “notwithstanding such large importations the demand for money has so far exceeded……..that serious embarrassment has ensured and business has almost come to a stand from the scarcity of circulating medium. As fast as rupees have been coined they have been taken into the interior and have there disappeared from circulation, either in the Indian substitute for stocking-foot or in the smelting-pot into bangles.”* The one way open was to have caused such additional imports of silver as would have sufficed both for the monetary as well as the non-monetary needs of the country. But the impors of silver were probably already at their highest. For, as was argued by Mr. Cassels, “the annual production of silver of the whole world does not exceed ten million sterling. During the last few years, therefore, India alone has annually taken, and to a great extent absorbed, more of the metal than has been produced by the whole world. It is clear that this cannot long continue without producing serious embarrassment. Either the European markets will be unable or unwilling to supply us, or the value of silver will rise to an extravagant extent. Under such circumstances it is not difficult to foresee that the present crisis must continually recur, and the commerce in this country must be periodically, if not permanently, crippled by the scarcity of the circulating medium.”† Had there been any credit media the contraction of currency * Minute on Gold Currency for India, dated December 1, 1863. Report, op. cit. p. 184. † Report, op. cit. p. 189.