Vol. 6 · pages 461–465

446 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES can only be explained on the assumption that they were anxious to kill two birds with one stone. The adoption of the sovereign, besides supporting a gold currency in India, was also calculated to promote the movement of international uniformity of coinage then in vogue. The utility of the “mohur” was in this respect comparatively inferior to that of the sovereign. But when Sir Richard Temple came upon the scene the prospect of some universal coin being internationally adopted seemed to be fast vanishing. At all events the Report of the English Commission on International Coinage, presided over by Lord Halifax, had pronounced adversely as to any change in the standard of the English sovereign. Untrammelled by any considerations for such a wider issue, Sir R. Temple was free to recommend the adoption of the “mohur” as the unit of currency in place of the sovereign.* “We have,” he wrote, “gold pieces representing fifteen, ten and five rupees respectively; and believed to represent these several sums very correctly, as regards the relative value of gold and silver ......... that ......... we should take the first opportunity to declare the gold coins legal tender to unlimited amount; that gold pieces should continue to bear the fixed relation to the rupee; that for a time it might be necessary to permit the rupee to remain legal tender to an unlimited amount, which would involve temporarily the difficulty of a double standard; that the transition period of double standard should be as short as possible, silver being reduced to a token coinage, and being made legal tender up to a small amount only; and that gold should be ultimately the one legal standard.” He proposed the ratio of 10 rupees for 120 grs. of standard i.e. 110 grs. of fine gold.† but he did not share the temerity of Sir Charles Trevelyan.‡ So intent was he on the project of a gold currency that he was prepared to alter the ratio so as to make it favourable to gold. The question of ratio, he observed, was one which “the Government of India ought to be able to determine. “Nevertheless, he said,” I would not object to make the sovereign a legal tender for 10 rupees and 4 annas. But, the sovereign being worth 10 rupees and a fraction over, there might be some slight trouble of calculation in changing it for silver, and this would be a drawback in respect of the use of the sovereign as currency in India. And if this objection were urged, I would not press for the sovereign being declared legal tender. But we should continue, under any circumstances, to receive the sovereign in our Treasuries at the present rating.” † This was a ratio of 15 : 1, which was a slight undervaluation of gold. ‡ Supra, Chap. I.

447 TOWARDS A GOLD STANDARD These are questions which have been determined by every nation that has adopted a gold currency. No doubt it is a difficult and important problem, but it cannot be insoluble, and it ought to be solved.” Such in outline was the first proposal for a gold currency. It was projected before the fall in the value of silver had commenced, and was therefore more a culmination of the past policy than a remedy against the ensuing depreciation of silver. In that consisted, probably, the chief strength of the proposal. It was in good time to avoid the cost of hauling up the currency which later on proved so very deterrent and caused the defeat of so many other projects. Besides, it cannot be said that at the time the memorandum was presented the Government was not warned of the impending crisis; for the wave of demonetizing silver had already commenced two years before.* But, for some reason not known to the public, no action was taken on the proposal. The second plan for the introduction of a gold currency was that of Colonel J. T. Smith, the able Mint Master of India. His plan was avowedly a remedy for the falling exchange.† The plan was set forth in the first essay in the brouchure, Silver and the Indian Exchanges, ‡ and may be described in his own words as follows:— “6. Although it cannot be denied that the difficulty of effecting this object of restoring the Indian exchange to its normal condition is much greater now than it would have been some years ago, owing to the decline which has already taken place, yet there seems to be sufficient ground for belief that, even now, if decided measures were adopted, it would not be too late to restore the currency to its former value for home (India)) payments; and that, too, without any shock or disturbance; the principal step being that of putting a stop to the coinage of silver on private account, at the * Lord Northbrook, who was the Viceroy of India when this proposal was made, in his evidence before the I.C.C of 1898, Q. 8,447, suggested that the reason for his not adopting it then was that “that was a time when gold was appreciating, and it was impossible to do.” This is, of course, historically untrue except on the hypothesis that the propsal came for consideration long after it was submitted. † Ho had previously taken part in the agitation for the introduction of a gold standard in India during the sixties with the sovereign as the unit. But that was as an advocate of the movement for uniformity of international coinage. Cf. his Remarks on a Gold Currency for India and Proposal of Measures for the Introduction of the British Sovereign, etc., etc. London, 1868. ‡ London, Effingham Wilson, 1876.

448 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES same time taking measures to discourage the importation, or at the least the circulation, of foreign-made, silver coins, and opening the Mints for the receipt of gold bullion for coinage. “ 7. To explain how this would operate, I must observe that “8. ... the internal trade of the Empire of India has increased and is increasing.............................. “9. Whatever may be the cause, the internal trade of India has, ever since the beginning of this century, required constant and steady additions to her currency, averaging during the last thirty-eight years upwards of five millions of pounds sterling per annum in value. Besides this, the returns show that the balance of imports over exports of gold bullion, during the same period, exceeded an average of two and a half millions sterling annually, having been, during the last twenty years, more than four millions per annum. “10. Such being the case, it apears to be a necessary consequence that, if the supply of rupees were put a stop to, the remainder must increase in local value, as compared with commodities, till they resumed the position which they held on a par with gold, at the rate of 10 rupees to a sovereign, for the fifteen years previous to 1870. “11. After that point had been attained, it would be the interest of merchants to take gold into the Indian Mints for coinage; and they would do so, indeed, before the attainment of this improvement of the exchanges, owing to the premium or ‘batta’ which would at first be obtained for the gold coins. “12. By this means gold would gradually be brought into India; and, as it has been shown that an addition to the circulating medium of at least five million sterling per annum is necessary, and no more silver coins being admitted (into the currency), it will slowly accumulate there.................. “13. The proposal therefore is that, after due notice, the coinage of silver on behalf of private individuals and advances upon silver bullion should be suspended; that part of the Act 23 of 1870, which makes it incumbent on the Government to receive and coin it, being repealed; the Government retaining in their own hands the power of replenishing the silver currency whenever they may deem it expedient. That

449 TOWARDS A GOLD STANDARD gold bullion should be received by the Government at the mint rate of 38 rupees 14 annas per standard ounce, and coined into sovereigns and half-sovereigns (representing 38 rupees 15 annas), or ten or five rupee-pieces of the same value, which should be declared legal tender, but not demandable, the present silver rupees continuing to be legal tender, as before.’* At the time the Smith plan was presented, the fall of silver had made itself felt so that a considerable support in favour of the plan was forthcoming. The support of the trading community was embodied in the resolution, dated July 15, 1876, of the Bengal Chamber of Commerce, which urged “that it was expedient, in view of any ultimate measures that the Government may adopt, that Clause 19 of Act XXIII of 1870, making it obligatory on the Mints in India to receive all silver tendered for coinage, and also Section II, Clause ( b) of Act III of 1871, making it obligatory on the Currency Department to issue notes against silver bullion sent in, be temporarily suspended, at the discretion of Government, and that during each such suspension or till further notice it be not lawful to import coined rupees from any foreign port.” A similar feeling was voiced by the Calcutta Trades Association. By this time the fall of exchange had also commenced to tell upon the finances of the Government of India, so much so that Sir William Muir, in his Financial Statement for 1876-77, was led to observe :— “ The sudden depreciation of silver and the consequent enhancement of charge to the Government of India in laying down yearly the sum required in England of about fifteen millions sterling, without doubt cast a grave shadow on the future. In truth, it may be said that the danger, from whatever point of view considered, is the gravest which has yet threatened the finances of India. War, famine, and drought have often inflicted losses on the Exchequer far greater than the charge which threatens us in the present year. But such calamities pass away; the loss is limited; and when it has been provided for the finances are again on sure and stable ground. This is not the case with the present cause of anxiety. Its immediate effects are serious enough. ......... But that which adds significance to it is that the end cannot be seen; * This was calculated to make the rupee-sterling exchange 2 s. gold. The average rupee-sterling exchange in 1876 was about 1s. 9.645d. This would have placed a small premium on gold which would have no doubt soon disappeared owing to the appreciation of the rupee consequent upon the stoppage of its coinage.

450 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES the future is involved in uncertainty.’* In the face of such a situation nothing would have been more natural than to expect the Government precipitating into some kind of action to save itself, if not others, from an impending calamity. Far from taking immediate steps, the Government not only failed to take any initiative, but showed, when pressed by the Bengal Chamber of Commerce to act upon the foregoing resolution, a surprising degree of academic somnolence only to be expected from an uninterested spectator. No doubt the proposal of the Bengal Chamber was defective in that it did not suggest the opening of the Indian Mints to the coinage of gold. The Government of India was sharp enough to fasten upon this defect. It made plain to the Chamber that if it had proposed the free coinage of gold. “such a recommendation would not have been open to the objections that appear fatal, in limine, to the adoption of the resolution actually adopted...... viz. to close the Mints temporarily to the free coinage of the one metal into legal-tender money, without simultaneously opening them to the free coinage of the other into legal tender money.’ Did it, then, adopt the proposal of Colonel Smith, which contained such a recommendation ? Not at all! Why did it not, then, adopt a remedy to which it saw no objections ? The reason was that it had arrived at a different diagnosis of the causes of the monetary disturbances. To the Government the possibilities of explaining “the disturbance in the equilibrium of the precious metals” seemed to be many and varied.† (1) The value of gold being unchanged, the value of silver had fallen ; (2) the value of silver being unchanged, the value of gold had risen ; (3) the value of gold had risen, and the value of silver had fallen ; (4) the value of both metals had risen, but the value of gold more than that of silver; (5) the value of both metals had fallen, but the value of silver more than that of gold. In the midst of such possibilities, marked, more by pedantry than logic, the Government warned the currency reformers that “the character of the remedies indicated, if the disturbance is found to be due to a rise in the value of gold, will obviously * P. 93. † Cf. The Resolution of the Government of India relating to the Depreciation in the Value of Silver, dated September 22, 1876, par. 6, Commons Paper 449 of 1893.