Vol. 6 · pages 386–390

371 FROM A DOUBLE STANDARD TO A SILVER STANDARD open for cautious and tentative experiments with regard to the future use of gold. The importation of gold already exists and is increasing, and the metal is much appreciated by the native population as generally to command a premium ……… Thus, after a time, if the use of gold becomes more general, and its value more fixed, some further step might be taken.” And such seems to have been the impression of the Secretary of State at the time, for he understood the force of the recommendation in favour of issuing notes against gold was that it would “effectively contribute to the introduction of a gold currency in India.”* But whether conceived as a relief to the mercantile community or as an avenue for introducing a gold currency the proviso was not put into effect. The Secretary of State objected† to any action being taken with regard thereto. In the meantime the paper currency did not prove the panacea, it was avowed to be. The extent it reached and the economy it effected were comparatively insignificant. TABLE VI EXTENT AND ECONOMY OF PAPER CURRENCY Presidencies Bullion Coin GovernmentSecurities Value ofNotes inCirculation Calcutta on Oct. 31, 1863 …… 1,84,55,922 1,10,44,078 2,95,00,000 Madras on Oct. 31, 1863 …… 73,00,000 …… 73,00,000 Bombay on Jan. 4, 1864 1,17,00,000 1,19,00,000 …… 2,36,00,000 Total 1,17,00,000 3,76,55,922 1,10,44,078 6,04,00,000 As was pointed out by Mr. Cassels‡ the currency notes, after three years, had been taken only to the extent of about 6 per cent, of the whole metallic currency, which was then estimated by Mr. Wilson to be £ 100,000,000 in sterling, and that they had actually fulfilled their primary object of releasing the * Par. 59 of the Secretary of State’s Despatch, No. 158, dated September 16, 1862. † See par. 64 of his Despatch, supra. ‡ 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

372 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES reproductive capital of the country only to the extent of a million sterling or 1 per cent, of the whole. Owing to the demand for Indian cotton in the Liverpool market to take the place of American cotton, the export of which was stopped during the Civil War, the growing foreign trade assumed enormous proportions. And as the paper currency gave no relief, the entire stress fell upon silver. The production of silver, however, was not increasing much faster than it did previously, and its absorption by India had not slackened. The inadequacy of a currency medium therefore continued to be felt as acutely as before, notwithstanding the introduction of a paper currency. Not only was gold imported in large quantities, but was employed for monetary purposes, although it was not legal tender. The fact was brought to the notice of the government of India by the Bombay Chamber of Commerce* in a memorial praying for the introduction of a gold currency in India, in which it was pointed out “that there is an increasing tendency to the creation of a gold ingot currency, but the natives of this country, as a rude remedy for the defects of the existing silver one,” and “that gold bars, stamped with the mark of Bombay banks, are for this purpose circulated in several parts of the country.” This led to an agitation for requiring the Government to give effect to the proviso in the Paper Currency Act,† and the movement assumed such dimensions that it forced the hands of the Government. On this occasion, the plan for effecting the change was boldly conceived. Sir Charles Trevelyan saw through the weak point of the proviso on which the Government was called upon to act. He argued that the currency notes were payable only in the current coin of the country, which in India was the silver rupee, and to hold a portion of the reserve gold which could not be tendered in payment of the notes was seriously to endanger their convertibility in times of political * Report of the Bombay Chamber of Commerce, 1863-64, App. I, p. 206. † 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.

373 FROM A DOUBLE STANDARD TO A SILVER STANDARD TABLE VII* TRADE AND CURRENCY Years. Merchandise. Treasure. Total Coinage of Excess (+) or Defeet (—) ofCoinage on Net Imports of Annual Production (in £, 00,000 omitted) ofNet Imports of Imports. £ Exports. £ Silver. £ Gold. £ Silver. £ Gold. £ Silver. £ Gold. £ Gold. Silver. 1860–61 23,493,716 32,970,605 5,328,009 4,232,569 5,297,150 65,038 – 30,859 – 4,167,531 23,9 8,2 1861–62 22,320,432 36,317,042 9,086,456 5,184,425 7,470,030 58,667 – 1,616,426 – 5,125,758 22,8 8,5 1862–63 22,632,384 47,859,645 12,550,155 6,848,156 9,355,405 130,666 – 3,194,750 – 6,717,490 21,6 9,0 1863–64 27,145,590 65,625,449 12,796,717 8,898,306 11,556,720 54,354 – 1,239,997 – 8,843,952 21,4 9,8 1864–65 28,150,923 68,027,016 10,078,798 9,839,964 10,911,322 95,672 + 832,524 – 9,744,292 22,6 10,3 1865–66 29,599,228 65,491,123 18,668,673 5,724,476 14,639,353 17,665 – 4,029,320 – 5,706,811 24,0 10,4 1866–67 29,038,715 41,859,994 6,963,073 3,842,328 6,183,113 27,725 – 779,960 – 3,814,603 24,2 10,1 1867–68 35,705,783 50,874,056 5,593,961 4,609,466 4,385,080 21,534 – 1,208,881 – 4,587,932 22,8 10,8 1868–69 35,990,142 53,062,165 8,601,022 5,159,352 4,269,305 25,156 – 4,331,717 – 5,134,196 22,0 10,0 1869–70 32,927,520 52,471,376 7,320,337 5,592,016 7,510,480 78,510 + 190,143 – 5,513,506 21,2 9,5 *Sources same as those used in the case of Table IV.

374 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES distrust or commercial panic.* He therefore ventured beyond the scope of the agitation, and pronounced that instead of allowing gold a backdoor entry into the currency system it ought to be made the standard of value in India. He did not agree with Mr. Wilson that the substitution of gold for the silver standard would be “to break faith with the creditor.” Nor was he much deterred by the fact that before the silver currency could be reduded to a subsidiary position, the introduction of gold in India would give rise to a double standard for the time being ; for he argued that “all nations must pass through a transition stage of a double standard before they arrive at a single standard.” Accordingly he proposed that (1) sovereigns and half-sovereigns of British or Australian standard should be legal tender in India, at the rate of one sovereign for Rs. 10, and that (2) Government currency notes should be exchangeable either for rupees or sovereigns at the rate of one sovereign for Rs. 10, but that they should not be exchangeable for bullion. His proposals were accepted by the Government of India and were communicated to the Secretary of State† for his sanction. But the Secretary of State, impatient and intolerant of any deviation from a monometallic system, whittled down the whole project with scant courtesy. His reply‡ is a grotesque piece of reasoning and terribly shallow. He was unwilling to allow the measure, because he felt satisfied that the rate of Rs. 10 to a sovereign underrated the sovereign too much to permit its circulation. Here he was on solid ground. The cost of producing a sovereign at a Mint in India was estimated§ at the time to be Rs. 10-4-8 ; while the cost of importing it to Calcutta from England was estimated at Rs. 10-4-10, and from Australia at Rs. 10-2-9. Whichever was the proper rate, it was certain that sovereigns could not circulate at the rate of Rs. 10 to 1. It was * 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 currrency 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. † Cf. Government of India’s Despatch No. 89, dated Simla, July 14, 1864. ‡ Financial Despatch from the Secretary of State, No. 224, dated Setpember 26, 1864. § 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.

375 FROM A DOUBLE STANDARD TO A SILVER STANDARD a pity that Sir Charles Trevelyan did not propose a higher ratio* so as to make the circulation of the sovereign an assured event. But the Secretary of State would have been averse to the measure just the same, even if the ratio had been favourable to the sovereign. To the Secretary of State, the measure, based as it was on an unfavourable ratio, was useless. But if based on a favourable ratio it was none the less pernicious, for, it portended the possibility of what he considered as the most vicious system of double standard, however temporary it might have been. The mere contingency of giving rise to a bimetallic system was enough to frighten the Secretary of State into opposition to the whole measure, for he refused to admit that “it may be for the public advantage to pass through a period of double standard in order to change the basis of the currency from silver to gold.” The only concession that the Secretary of State was willing to make was to permit “that gold coin should be received into public treasuries at a rate to be fixed by Government and publicly announced by Proclamation” without making it a general legal tender in India. It will be recalled that this was a revival of that foolish measure which was abandoned in 1852 for having embarrassed the Government. To offer to receive coin which you cannot pay back is to court trouble, and it was to obviate the too-well-known danger inherent in the project that this more complete measure was proposed. But the currency stringency was so great that the Government of India, rather than obstinately cling to their view, consented to avail themselves of the suggestion of the Secretary of State, and issued a Government Notification in November, 1864, which proclaimed that “sovereign and half-sovereigns coined at any authorized Royal Mint in England or Australia of current weight, shall until further notice be received in all the Treasuries of British India and its dependencies in payment of sums due to Government, as the equivalent of 10 and 5 Rs. respectively ; and that such sovereigns and half-sovereigns shall, whenever available at any Government Treasury, be paid at the same rates to any person willing to receive them in payment of claims against the Government.” * 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.