Vol. 6 · pages 456–460

441 THE SILVER STANDARD AND THE EVILS OF ITS INSTABILITY of the rupee. In the opinion of the Hon. Mr. Baring (afterwards Lord Cromer),* “It is not the fact that the value of the rupee is, comparatively speaking, low that causes inconvenience. It would be possible, although it might be exceedingly troublesome, to adjust the Indian fiscal system to a rupee of any value. What causes inconvenience alike to Government and to trade is that the value of the rupee is unstable. It is impossible to state accurately in Indian currency what the annual liabilities of the Government of India are. These liabilities have to be calculated afresh every year according to the variations which take place in the relative value of gold and silver, and a calculation which will hold good for even one year is exceedingly difficult to make.” Owing to such fluctuations, no rate could be assumed in the Budget which was likely to turn out to be the true market rate, As matters stood, the rate realized on an average during a particular year differed so widely from the Budget rate that the finances of the Government became, to employ the phraseology of a finance minister, a “veritable gamble.” How greatly the annual Budget must have been deranged by the sudden and unprovided-for changes in the rupee cost of the sterling payments Table XXII on page 442 may help to give some idea. If Government finance was subjected to such uncertainties as a result of exchange fluctuations, private trade also became more or less a matter of speculation. Fluctuations in exchange are, of course, a common incident of international trade. But if they are not to produce discontinuity in trade and industry there must be definite limits to such fluctuations. If the limits are ascertainable, trade would be reasonably certain in its calculation, and speculation in exchange would be limited within the known limits of deviations from an established par. Where, on the other hand, the limits are unknown, all calculations of trade are frustrated and speculation in exchange takes the place of legitimate trading. Now, it is obvious that fluctuations in the exchange between two countries will be limited in extent if the two countries have the same standard of value. Where there is no such common standard of value the limits, though they * Financial Statement, 1883-84, p. 26.

442 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES TABLE XXII FLUCTUATIONS OF EXCHANGE AND FLUCTUATIONS IN THE RUPEE COST OF GOLD PAYMENTS* Financial Year. Estimated Rate of Exchange on which the Budget of the Year was framed. Rate of Exchange actually realized on the Average during the Year. Changes in the Rupee Cost of Sterling Payments consequent upon Changes between the Estimated and the Realized Rates of Exchange. Increase. Decrease. s. d. s. d. Rs. Rs. 1874-75 1 10.375 1 10.156 15,91,764 — 1875-76 1 9.875 1 9.626 19,57,917 — 1876-77 1 8.5 1 8.508 — 76,736 1877-78 1 9.23 1 8.791 38,43,050 — 1878-79 1 8.4 1 7.794 56,87,129 — 1879-80 1 7 1 7.961 — 84,40,737 1880-81 1 8 1 7.956 4,24,722 — 1881-82 1 8 1 7.895 10,17,482 — 1882-83 1 8 1 7.525 37,46,890 — 1883-84 1 7.5 1 7.536 — 3,62,902 1884-85 1 7.5 1 7.308 18,97,307 — 1885-86 1 7 1 6.254 56,82,638 — 1886-87 1 6 1 5.441 65,17,721 — 1887-88 1 5.5 1 4.898 71,90,097 — 1888-89 1 4.9 1 4.379 77,98,400 — 1889-90 1 4.38 1 4.566 — 27,31,892 1890-91 1 4.552 1 6.09 — 2,35,51,744 1891-92 1 5.25 1 4.733 80,09,366 — * Compiled from figures given in the Final Report of the Gold and Silver Commission, p. 40, and in App. II, p. 270, to the Report of the Indian Currency Committee, 1893.

443 THE SILVER STANDARD AND THE EVILS OF ITS INSTABILITY exist, are too indefinite to be of much practical use. The rupture of the fixed par of exchange, having destroyed a common standard of value between gold and silver countries, removed the limits on the exchange fluctuations between such countries. As a result of such variations in the value of the standard measure, trade advanced by “rushes and pauses,” and speculation became feverishly active.* That progress of trade depends on stability is a truism which seldom comes home until it is denied in fact. It is difficult to appreciate its importance to healthy enterprise when government is stable, credit is secure, and conditions are uniform. And yet so great is the handicap of instability that everywhere business men have been led by a variety of devices to produce stability in domains enveloped by uncertainty. Everywhere there have grown up business barometers forewarning business men of impending changes and so enabling them to forearm against them by timely changes in their operations. The whole of insurance business is aimed at giving stability to economic life. The necessity which compelled all regularly established Governments to maintain standard measures by which the true proportion between things as to their quantities might be ascertained and dealings in them regulated with certainty was motivated by the same purpose. The meticulous precision with which every civilised country defines its standard measures, and the large machinery it maintains to preserve them from deviation, are only evidences of the great importance that an economic society must continue to attach to the matter of providing precision of expression and assurance of fulfilment with regard to the contracts entered into by its members in their individual or corporate capacities. Important as are the standard measures of a community, its measures of a community, its measure of value is by far the most important of them all.† The measures of weight, extension, or volume enter only into particular transactions. If the pound, the bushel, or the yard were altered the evils would be comparatively restricted in scope. But the measure of value is all-prevading. * Evid. Indian Currency Committee, 1898, Q. 6,290, 9,808-10. † Cf. Harris, An Essay upon Money and Coins (reprinted by J. R. McCulloch in his volume of Scarce Tracts on Money, Part I, Chap. II, par. 21 ; Part II, Chap. II, pars. 11, 13, and 20).

444 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES “There is no contract,” Peel declared.* “public or private, no engagement national or individual, which is unaffected by it. The enterprises of commerce, the profits of trade, the arrangements made in all domestic relations of society, the wages, of labour, pecuniary transactions of the highest amount and of the lowest, the payment of national debt, the provision for national expenditure, the command which the coin of the smallest denomination has over the necessaries of life, are all affected” by changes in the measure of value. This is because every contract, though ultimately a contract in goods, is primarily a contract in value. It is, therefore, not enough to maintain constancy in the measures of weight, capacity, or volume. A contract as one of goods may remain exact to the measure stipulated, but may nevertheless be vitiated as a contract in values by reason of changes in the measure of values. The necessity of preserving stability in its measure of value falls on the shoulders of every Government of an orderly society. But its importance grows beyond disputes as society advances from status to contract. The conservation of the contractual basis of society then becomes tantamount to the conservation of an invariable measure of value. The work of reconstituting a common measure of value in some form or other, which those misguided legislators of the seventies helped to destroy, it was found, could not be long delayed with impunity. The consequences that followed in the wake of that legislation, as recounted before, were too severe to allow the situation to remain unrectified. That efforts for reconstruction should have been launched before much mischief was done only shows that a world linked by ties of trade will insist, if it can, that its currency systems must be laid on a common gauge. zz * Cf. his speech dated May 6, 1844, delivered during the Commons debates on the Bank Charter Act. Hansard, Vol. XXXIV, p. 720.

CHAPTER IV TOWARDS A GOLD STANDARD The establishment of stable monetary conditions was naturally enough dependent upon the restoration of a common standard of value. Plain as was the aim, its accomplishment was by no means an easy matter. Two ways seemed at first to be open for carrying it out in practice. One was to adopt a common metal as currency, and since all important countries of the world had gone over to the gold standard it meant the silver-standard countries should abandon their standard in favour of gold. The other was to let the gold and silver standard countries keep to their currencies and to establish between them a fixed ratio of exchange so as to make the two metals into a common standard of value. The history of the agitation for the reform of the Indian currency is a history of these two movements. The movement for the introduction of a gold standard was, however, the first to occupy the field. The failure of the notification of 1868 may be said to have marked the failure of a policy, but the movement for a gold currency in India started in the sixties was not altogether stamped out of the country. That the movement still had life in it is shown by the fact that it was revived four years later by Sir R. Temple, when he became the Finance Minister of India, in a memorandum* dated May 15, 1872. The important particular in which he differed from his predecessors consisted in the fact that while they all aimed to make the British sovereign the principal unit of the gold currency in India, he desired to give that place to the Indian gold coin, the “mohur.” Why his predecessors did not do the same when the problem of correctly rating the soverign was said to have baffled them so much is a little surprising when it is recalled that the Indian Mints had been since long past issuing the “mohur”, which, as it was possible to rate it correctly, could as well have been made the principal unit of the gold currency in India. That they did not * Printed as Appendix I, No. 12, to the Report of the Indian Currency Committee of 1898.