Vol. 6 · pages 391–395

376 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES The real par, however, was somewhat above Rs. 10 to the sovereign,* and the notification was therefore inoperative. The currency situation, on the other hand, continued to be as acute as ever, and the Government of India was again moved in 1866 by the Bengal Chamber of Commerce to take steps to make the circulation of gold effective. This time the Chamber insisted on the institution of a Commission of Inquiry “as to the expediency of introducing gold into the monetary system of India.” But the Government of India held† that “ instead of a gold a paper currency has been introduced, in the expectation that it would prove a more convenient and acceptable circulating medium than either of the precious metals,” and consequently “ it must be shown that paper has not proved and is not likely to prove a circulating medium adequate to the wants and suitable to the habits of the country, before an endeavour is made to introduce gold in supersession of, or in addition to, paper.” A commission was therefore appointed to inquire into the “operation of the existing currency arrangements which were established under Act XIX of 1861,” and to report as to “what may be the advantage, as based on expediency, of the introduction of the legal tender of gold into India, in addition to that of silver.” After an exhaustive investigation, the Commission came to the conclusion‡ that owing to several causes the paper currency had failed to establish itself among the circulating media of the country, but that gold was finding a larger place in the transactions of the people. The Commission ended by urging upon the Government “to cause a legal tender of gold to be a part of the currency arrangements of India.” Now it was the turn of the Government to give effect to the recommendation. But, curiously enough, it did not go to the extent of adopting the recommendation of the Commission which it had itself appointed. Instead of making gold legal tender, as advised by the Commission, the only action the Government took was to issue another Notification on October 28, 1868, which simply altered the rate of the sovereign to Rs. 10-8, without doing anything further to avoid the evil consequence attendant upon that one-sided measure. Fortunately for the Government, even this correction of the rate did not induce any flow of gold into * Cf. Appendix A to the Minute by Sir William Mansfield on Gold Currency for India, H. of C. Return 79 of 1865. † Resolution in the Financial Department, dated February 3, 1866, in the Fort William Gazette of the same date, under Notification No. 592. ‡ For the Report; of the Comission, see H. of C. Return 148 of 1868.

377 FROM A DOUBLE STANDARD TO A SILVER STANDARD the circulation of the country. The currency troubles had by then subsided, and as no new pressure was exerted upon the Government, this proved the last of two abortive attempts the Government made to introduce gold into India. For the time being, the problem was solved by the natural course of events. But, as subsequent events showed, the change to a gold standard would have been better for India.* and would have been welcomed† in the interests of Europe, which was then suffering from high prices due to the superfluity of gold. At this particular juncture, the Government of India was really at the crossing of ways, and could have averted the misfortunes that were to befall it and its people if it had sided with the forces of change and replaced the silver standard by a gold standard, as it could most easily have done. That those in charge of Indian affairs should have thrown the weight of their authority against the change was no dishonest act deserving of reproach, ‡ but it does furnish one more illustration of those disastrous human ways, which often lead people to regard the situation in which they live as most secure, just when it is most precarious. So secure did they feel about the currency situation that in 1870, when the Mint Law came to be revised and consolidated, they were content, as though nothing had happened or was likely to happen, to allow the silver standard of 1835 to continue pure and unsullied by any admixture of gold.§ Alas ! those, who then said¶ that they were not called upon to take more than a “juridical” view of the Indian currency question, knew very little what was in store for them. zz * 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). †Cf. J. R. McCulloch, Dictionary of Commerce, Ed. 1869, p. 1131. ‡ 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. §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 indifferences shown that they were afterwards dropped by the Select Committee, which preferred to leave the matter to the discretion of the Executive. ¶ 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.

CHAPTER II THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITY It is clear how the evolutionary process with respect to the Indian currency culminated in the establishment of a silver standard and how the agitation for a gold currency ended in the silver standard being supplemented by a paper currency. Before proceeding to inquire into the working of such a mixed system, it would be useful to review briefly the nature of its framework. The metallic part of it was regulated by Act XXIII of 1870. The coins authorized and legalized thereunder were as shown on p. 379. (Table VIII) The Act made no innovations either in regard to the number of coins issued by the Mints or their legal-tender powers. Identical though it was with the earlier enactments in the matter of coins,* its juridical provisions were designed to perfect the monetary law of the country as had never been done before. The former Acts which it repealed were very sparing in their recognition of the principle of mint “remedy” or “toleration”, as it is called. The point has been largely deemed to be one of mere mint technique. That is so ; but it is not without its monetary significance. When the precious metals were current by weight the question of a mint toleration could not possibly have arisen, for it was open to every one to ascertain the same by weighing the value of his return. But since the invention of coinage, when currency came to be by tale, every one has trusted that the * This may be seen from the following :— (a) 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. (b) 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. (c) 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.

379 THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITYTABLE VIII Denomination of Coins issued by the Mint. Gross Wt Troy Grs. Remedy in Weight. Fineness. Troy Grs. Remedy in Fineness. Legal-tender Power. I. Gold Coins (a) (i) Mohur . . 180 2 ths1000 165 2 ths1000 (ii) Third of a Mohur . . 60 ” 65 ” Not Legal Tender at all. (iii) Two-thirds of a Mohur . 120 ” 110 ” (iv) Double Mohur . . 360 ” 330 ” II. Silver Coins (b) . . (i) Rupee . . . . 180 5 ths1000 165 2 ths1000 Unlimited Legal Tender. (ii) Half-rupee . . . 90 ” 82.5 ”(iii) Quarter-rupee . . 45 7 ths1000 41.25 3 ths1000 Legal Tender for Fractions of a Rupee only.(iv) Eighth of a Rupee . . 22.5 10 ths1000 20.625 ” III. Copper Coins (c) (i) Pice . . . . 100 1 ths40 — — Legal Tender for 1 th64 part of a Rupee. (ii) Double Pice . . . 200 ” — — Legal Tender for 1 32 th part of a Rupee. (iii) Half-pice . . . 50 ” — — Legal Tender for 1 th128 Part of a Rupee. (iv) Pie . . . 33.3 ” — — Legal Tender for 1 nd192 Par of a Rupee.

380 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES coins contained the value they were certified to contain. The actual value of the coin cannot, however, always be in exact agreement with its certified value. Such differences are bound to exist, and even with all the improvements in the art of coinage it would be difficult to avoid them. What matters is the extent of the deviation from the true mint standard. The mint laws of all countries, therefore contain provisions which declare that coins shall not be legal tender at their certified value if they err from their legal standard beyond a certain margin. Indeed to make coins legal tender without prescribing a limit to their toleration is to open a way to fraud. In so far as the Act laid down a limit of toleration to the coins it authorized to be issued from the Mint, it was a salutary measure. It is to be regretted, however, that the Act instituted no machinery with which to ascertain that the coinage conformed to the law.* Another important improvement made by the Act was the recognition of the principle of free coinage. The principle, though it has not received the attention it deserves, is the very basis of a sound currency in that it has an important bearing on the cardinal question of the quantity of currency necessary for the transactions of the community. Two ways may be said to be open by which this quantity can be regulated. One way is to close the Mint and to leave it to the discretion of the Government to manipulate the currency to suit the needs. The other is to keep the Mint open and to leave it to the self-interest of individuals to determine the amount of currency they require. In the absence of unfailing tests to guide the exercise of discretion necessary in the case of closed Mints, the principle of open Mints has been agreed upon as the superior of the two plans. When every individual can obtain coin for bullion and convert coin into bullion, as would be the case under open Mints, the quantity is automatically regulated. If the increasing demands of commerce require a large amount of circulating medium, it is for the interest of the community to divert a larger quantity of its capital for this purpose ; if, on the contrary, the state of trade is such as to require less, a portion of the coin is * This machinery is provided in England by what is known as the “Trial of the Pyx.” For a history of this in 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 Msasters to book.