Vol. 6 · pages 486–490

471 TOWARDS A GOLD STANDARD backed by an adequate gold reserve. But the Herschell Committee, after an extended investigation into the working of the currency systems of different countries, reported*:— “It is impossible ……… to review foreign systems of currency, without feeling that, however admirable may be the precautions of our own [English] currency system, other nations have adopted different systems which appear to have worked without difficulty, and enabled them to maintain for their respective currencies a gold standard and a substantial parity of exchange with the gold-using countries of the world” with little or no gold. The Committee, therefore, was completely satisfied with the proposals of the Government of India, and not only sanctioned their adoption,† but added, by way of introducing a modification in them, that “The closing of the Mints against the free coinage of silver should be accompanied by an announcement that, though closed to the public, they will be used by the Government for the coinage of rupees in exchange for gold at a ratio to be then fixed, say 1 s. 4 d. per rupee, and that at the Government Treasuries gold will be received in satisfaction of public dues at the same ratio.”‡ These recommendations were carried into effect on June 26, 1893, which forms as great a landmark in the history of Indian currency as did the year 1835. On that date were promulgated one legislative enactment and three executive notifications, together calculated to accomplish the object in view. The Act (VIII) of 1893 was only a repealing Act. It repealed:— (i) The Indian Coinage Act, XXIII of 1870. Sections 19 to 26 (both inclusive), requiring the Mint Masters to coin all silver brought to their Mints for coinage.§ * Report, par. 93. † Report, par. 155. ‡ Report, par. 156. § These sections also contained provisions for the coinage of all gold brought to the Mints for the purpose by private persons. The quantity brought to the Mints was quite trifling, and the gold coins, i.e. the mohurs struck, were not legal tender. As they were to be superseded by sovereigns to be coined at the Mints upon their being subsequently thrown open to the free coinage of gold, it was thought undesirable that any more of these mohurs should be coined Consequently, along with silver, Mints were also closed to gold.

472 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES (ii) The Indian Paper Currency, 1882.* (a) Section 11, Clause (b), requiring the Paper Currency Department to issue notes against silver coin made under the Portuguese Convention Act, 1881,† (b) Section 11, Clause (a), requiring the Paper Currency Department to issue notes against silver bullion or foreign silver coin.‡ ( c) Section 13. Only the proviso limiting the gold portion of the Paper Currency Reserve to one-fourth of the Total Reserve.§ These repeals by the Act were supplemented by an executive Notification No. 2663, announcing in conformity with the suggestion of the Herschell Committee that the Government Treasuries would receive sovereigns and half-sovereigns of current weight in payment of public dues at the rate of 15 rupees and 7 rupees 8 annas respectively. Since gold was not made general legal tender by any of the above measures, it was feared that the Government might be embarrassed by the accumulation in its Treasuries of a stock money which it could not pay out in discharge of its obligations. To enable Government to rid the Treasuries of gold, should it accumulate in them to an inconvenient extent, there followed another Notification, No. 2664, requiring that the Currency Department should issue, on the requisition of the Controller-General, currency notes in exchange for gold coin or gold bullion, at the rate of one Government rupee for 7.53344 grs. trey of fine gold, or sovereigns or half-sovereigns at the rate of 15 rupees and 7 rupees 8 annas respectively. To give effect to the second modification introduced by the Herschell Committee, there was issued a third Notification, No. 2662, to the effect that “The Governor-General in Council hereby announces that, unitil further orders, gold coins and gold bullion will be received by the Mint Masters of the Calcutta and Bombay * The repeal of these sections of the Act also called for the repeal of other sections depending upon them, such as sections 14 and 15 and alterations in Sections 21 and 28, to bring the whole Act in accord with the policy of a gold standard then inaugurated. † The Convention had come to an end and the retention of the clause was therefore unnecessary. ‡ The retention of this clause would have been inconsistent with the closure of the Mints. § As gold was to be the future standard of India, this limitation was no longer necessary.

473 TOWARDS A GOLD STANDARD Mints respectively, in exchange for Government rupees, at the rate of 7.53344 grs. troy of fine gold for one rupee on the following conditions :— (1) Such coins or bullion must be fit for coinage. (2) The quantity tendered at one time must not be less than 50 tolas. (3) A charge of one-fourth per mille will be made on all gold coin or bullion which is melted or cut so as to render the same fit for receipt into the Mint. (4) The Mint Master, on receipt of gold coin or bullion into the Mint, shall grant to the proprietor a receipt which shall entitle him to a certificate from the Mint and Assay Masters for the amount of the rupees to be given in exchange for such coin or bullion payable at the General (Reserve) Treasury, Calcutta or Bombay. Such certificates shall be payable at the General Treasury after such lapse of time from the issue thereof as the Comptroller-General may fix, from time to time.” Before the policy adumbrated by these measures was carried to completion there came up a move for the undoing of it. After the failure of the International Monetary Conference of 1892 the United States and France, two countries most heavily burdened with an overvalued stock of silver, opened negotiation with the British Government, asking the latter to agree to certain conditions on the grant of which they were to open their Mints to the free coinage of silver at the ratio of 15½ to 1. These conditions included :* (1) Opening of the Indian Mints, which had been closed to the free coinage of silver, and an undertaking not to make gold legal tender in India. (2) Placing one-fifth of the bullion in the Issue Department of the Bank of England in silver. (3) (a) Raising the legal-tender limit of silver in England to £10. * Cf. Correspondence respecting the Proposals on Currency made by the Special Envoys from the United States, P.P.C. 8667 of 1897, p. 3.

474 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES (b) Issuing the 20s. notes based on silver, which shall be legal tender. ( c) Retirement, gradual or otherwise, of the 10s. gold pieces, and substitution of paper based on silver. (4) Agreement to coin annually a certain quantity of silver. (5) Opening of English Mints to the coinage of rupees and for coinage of British dollars, which shall be full legal tender in Straits Settlements and other silver-standard Colonies, and tender in the United Kingdom to the limit of silver legal tender. (6) Colonial action, and coinage of silver in Egypt. (7) Something having the general scope of the Huskisson plan. In these negotiations the Treasury again reverted to its old pose. It refused to discuss the conditions requiring a change in the British currency, but argued that the opening of the Indian Mints, if brought about, should be regarded as an adequate “contribution which could be made by the British Empire towards any international agreement with the object of securing” a stable monetary par of exchange between gold and silver,* and the representatives of the United States and France seemed to have concurred in that view. The negotiations, however, failed, because of the firm stand taken by the Government of India. The Government had suffered too long to be the scapegoat of the Treasury. Nor did it see any reason why it should be called upon to pull the chestnuts off the fire for the benefit of France and the United States. In a letter commenting upon the proposals, the Government of India observed†:— “The changes which are involved in the arrangements proposed to Her Mahesty’s Government are the following : France and the United States are to open their Mints to the free coinage of silver, continuing the free coinage of gold and the unlimited legal tender of coins of both metals, the ratio remaining unchanged in France and being altered in the French ratio of 15½ to 1 in the United States. India is to open * Cf. letter dated October 16, 1897, to the Foreign Office, P.P.C. 8667 of 1897, p. 15. † Despatch dated September 16, 1897, to the Secretary of State, ibid, p. 9. Italics not in the original

475 TOWARDS A GOLD STANDARD her Mints to silver, to keep them closed to gold, and to undertake not to make gold legal tender. France and the United States would thus be bimetallic; India would be monometallic (silver) ; whilst most of the other important countries of the world would be monometallic (gold). ***** “The first result of the suggested measures, if they even temporarily succeed in their object, would be an immense disturbance of Indian trade and industry, by the sudden rise from about 16d. to about 23d. the rupee. Such a rise is enough to kill our export trade, for the time at least …… such an arrangement as is proposed is an infinitely more serious question for India than for either of the other two countries, for it seems clear that practically the whole risk of disaster from failure would fall on india alone. What would happen in each of the three countries if the agreement broke down and came to an end ? France possesses a large stock of gold, and the United States are at present in much the same situation as France, though the stock of that metal is not so large. It may be admitted that if no precautions were taken these gold reserves might disappear under the operation of the agreement, and in that case, if the experiment ultimately failed, the two countries concerned would suffer great loss. But it is inconceivable that precautions would not be taken, at all events, so soon as the danger of the depletion of the gold reserves manifested itself, and, therefore, it is probable that no particular change would take place in the monetary system of France or the United States, the only effect of the agreement being a coinage of silver which would terminate with the termination of the agreement. Thus the whole cost of the failure, if the experiment should fail, would be borne by India. Here the rupee would rise with great swiftness, it would keep steady for a time, and then, when the collapse came, it would fall headlong. What course could we then adopt to prevent the fluctuation of the exchange value of our standard of value with the fluctuations in the price of silver ? We do not think that any remedy would be open to us, for if the Indian Mints were reopened to silver now, it would …… be practically impossible for the Government of India to close them again, and even if they were closed it would only be after very large additions had been made to the amont of silver in circulation.”