Vol. 6 · pages 381–385

366 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES might not have been felt as severely as it was. But there was no credit money worth the name. The Government issued interest-bearing Treasury notes, which formed a part of the circulating medium of the country. But, apart from being insignificant in amount,* these Treasury notes had “proved a failure, owing, firstly, to the condition that they would not be received in payment of revenue for twelve months; secondly, they would be paid off or received only where issued, so that as the issues were confined to Calcutta, Madras and Bombay, their use and employment for purposes of circulation were limited to those cities …… and lastly, because their amounts were too large and their period of running at interest too short.”† Nor was banking so widely developed as to satisfy the currency needs of comerce. The chief hindrance to its growth was the attitude of the Court. Being itself a commercial body largely dealing in exchange, the Court was averse to the development of banking institutions lest they should prove rivals. As this traditional policy of hostility continued even after the Court had ceased to be a body of merchant princes, banks did not grow with the growth of trade. Indeed, as late as 1856 banks in India numbered few and their issues were small, as shown in the table on page 367. (Table V) The insufficiency of silver and the want of credit currency caused such an embrrassment to trade that there grew up a change in the attitude toward the Currency Act of 1835, and people for once, began to ask whether, although it was well to have changed from bimetallism to monometallism, it would not have been better to have preferred gold monometallism to silver monometallism. As more and more of gold was imported and coined, the stronger grew the demand for giving it a legal * Amount of Indian Treasury notes outstanding :— On April 30, 1850 £804,988 On April 30, 1851 802,036 On April 30, 1852 770,301 Extracted from Table No. 2 of the Return On April 30, 1853 850,432 relating to East India Revenues, etc., On April 30, 1854 850,627 Parliamentary paper 201, VIII, 1858. On April 30, 1855 889,875 On April 30, 1856 967,711 † 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.

367 FROM A DOUBLE STANDARD TO A SILVER STANDARD TABLE V BANKS IN INDIA * Name of the Bank. Year of Establishment. Head Offices. Branches and Agencies. Capital. Notes in Circulation. £ Specie in Coffers. £ Bills under Discount. £ Subscribed. £ Paid up. £ Bank of Bengal 1809 Calcutta 1,070,000 1,070,000 1,714,771 851,964 125,251 Bank of Madras 1843 Madras 300,000 300,000 123,719 139,960 59,871 Bank of Bombay 1840 Bombay 522,000 522,000 571,089 240,073 195,836 Oriental Bank. 1851 1,215,000 1,215,000 199,279 1,146,529 2,918,399 Agra and U.P. . 1833 Calcutta Agra, Madras, Lahore, Canton, and London 700,000 700,000 — 74,362 — N.W. Bank 1844 ” Bo mbay, Simla, Mussowri and Agra Agencies in Delhi and Cawnpore 220,560 220,000 — — — London & Eastern Bank 1854 250,000 — 325,000 — — Commercial Bank 1854 Bombay A g e n t s i n L o n d o n , Calcutta, Canton, & Shanghai 1,000,000 456,000 — — — Delhi Bank . 1844 Delhi A g e n t s i n L o n d o n , C a l c u t t a , B o m b a y , and Madras — 180,000 — — — Simla Bank . 1844 — 63,850 — — — Dacca Bank . 1846 30,000 — — — — Mercantile Bank Bombay London, Calcutta, Colombo, Kandy, Canton, and Shanghai 500,000 328,826 777,156 77,239 109,547 India, China and Australian Bank had not commenced business * R. M. Martin, The Indian Empire, Vol. 1, p. 665. N.B.—The table in original does not specify dates, but internal evidence shows that it is a about 1856.

368 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES status in the existing system of Indian currency.* All were agreed on the principle of a gold currency : whatever difference there was, was confined to the method of its adoption. The introduction of gold on a bimetallic basis was out of the question, for the Government refused to make what it deemed to be the “hopeless attempt” to fix the value of gold and silver and compel their acceptance at that value.† The projects which the Government was willing to consider‡ were : (1) to introduce the “sovereign” or some other gold coin and to let it circulate at its market price from day to day as measured in silver; (2) to issue a new gold coin, bearing the exact value of a given number of rupees, and make it a legal tender for a limited period, when it might be readjusted and again valued, and made a legal tender for a similar period at the new rate ; (3) to introduce the English sovereign as a legal tender for Rs. 10, but limited in legal tender to the amount of Rs. 20 or two sovereigns ; or (4) to substitute a gold standard for the silver standard. Of these projects, the first three were evidently unsafe as currency expendients. Fixity of value between the various components of the currency is an essential requisite in a wellregulated monetary system. Each coin must define a fixed value, in terms of the others realizable by the most untutored intellect. When it ceases to do so, it becomes a mere commodity, the value of which fluctuates with the fluctuations of the market. This criterion ruled out the first two projects. To have introduced a coin as money, the value of which could not be vouched for— as would have been the case under the first project—from one day to another, apart from the trouble of computing and ascertaining the fluctuations, would have been a source of such embarassment that the Government, it must be said, acted wisely in not adopting it. There was no saving grace in the second project to recommend its adoption in preference to the first. If it had been adopted the result would have been that during the period when a rate remained fixed, gold would have * 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. † Ibid., p. 6. ‡ Cf. Minute by the Rt. Hon. James Wilson, dated December 25, 1859, Ibid., p. 23.

369 FROM A DOUBLE STANDARD TO A SILVER STANDARD been forced into circulation supposing that its market value was lower, and at the end of the year, if it was known that the rate would be revised and the value of the coin be reduced in conformity with the fall of gold, a general struggle to get rid of the overrated gold coin and shift the inevitable loss to the shoulders of others would have certainly ensued. The third was a somewhat strange proposal. It is possible with a low-priced metal to strike coins of less than full value for the purposes of small payments and limit their tender. But this is not possible with a high-priced metal, the raison d’etre of which is to facilitate large transactions. The objections to the plan could hardly be concealed. So long as gold was undervalued, it would not circulate at all. But once it became overvalued owing to changes in the market ratio, the rupee would go out of circulation, and shopkeepers and traders would remain possessed of a coin which would be of no use in liquidating large transactions. The only project free from these faults was the adoption of a gold standard, with silver as a subsidiary currency. The strongest argument, the Government could advance against this demand was that “in a country where all obligations have been contracted to be paid in silver, to make a law by which they could forcibly be paid in anything else would simply be to defraud the creditor for the advantage of the debtor, and to break public faith.”* However sound the argument might have been, it was hopelessly inadequate to meet the growing demand to place the Indian currency on an expanding basis. Indeed, it cannot be said that the Government was really serious in its opposition to a gold currency. For the strength of its position, it relied not so much on the soundness of its arguments against gold, but on its discovery that a better solution than a gold currency existed at hand. If what was wanted was a supplement to the existing currency, then the remedy proposed by the Government was unassailable. Gold would have been uneconomical and inconvenient. Silver backed by paper would make the currency economical, convenient, and expansive. Indeed, the advantages were so much in favour of the official alternative that this first attempt against the silver standard resulted not in the establishment of a gold standard, but in the introduction of a Government paper currency to supplement the existing silver standard. * Ibid, p. 26.

370 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES None the less, the desire for a gold standard on the part of the people was too great to be altogether ignored, though the demand for it was supposed to have been met by the alternative measure. The paper currency, as originally conceived by Mr. Wilson, was a complete counterblast to the gold agitation. But his successor, Mr. Laing, differed from him in what he regarded as the “barbarous” exclusion of gold from Indian currency. He therefore introduced two important provisos in the original Bill, when the task of carrying it through fell upon him, owing to the untimely death of Mr. Wilson. One was to raise the lowest denomination of notes from Rs. 5 to Rs. 20. The other was “to authorize the Governor-General in Council from time to time to direct by order to be published in the Gazettes of Calcutta, Madras and Bombay, that notes to an extent not exceeding one-fourth of the total amount of issues represented by coin and bullion …… be issued in exchange for gold coin…... or bullion computed at rates to be fixed by such order .........” The Act, which afterwards embodied the Bill, adopted the second proviso in toto, and the first after being modified so as to fix Rs. 10 as the lowest denomination of notes to be issued. Although its general tenor is clear, the immediate aim of the second proviso does not become quite clear from a perusal of the official papers. The Select Committee on the Paper Currency Bill seem to have held that the proviso was innocuous, if not good. It thought “that on special occasions and in particular transactions it might be a great advantage to the mercantile community to know that gold could be made available as money at a fixed rate. If, on the other hand, at the rate fixed gold did not enter into circulation it would prove that silver, with a secure and convertible paper currency, gave perfect confidence and answered all the wants of the trade and of the community, and the enactment would remain a dead letter and be perfectly harmless.” But there is no doubt that Mr. Laing looked upon it as an easy means of making a transition to the gold standard. In his Minute on Currency and Banking, dated May 7, 1862, he wrote : “The object of this proviso was simply to leave the door