Vol. 6 · pages 496–500

481 TOWARDS A GOLD STANDARD and in India. Looking forward, as we do, to the effective establishment in india of a gold standard and currency, based on the principles of the free inflow and outflow of gold, we recommend these measures for adoption.” These recommendations were accepted by the Secretary of State,* who decided that— “the policy of keeping the Indian Mints closed to the unrestricted coinage of silver shall be maintained,” and called upon the Government of India as soon as it deemed expedient to “take the necessary steps for making the British sovereign a legal tender and a current coin, and make preparations for the coinage of gold under the conditions suggested by the Committee.” The first recommendation of the Committee was given effect to by the Government passing an Act commonly called the indian Coinage and Paper Currency Act (XXII) of 1899. That Act made the sovereign and half-sovereign legal tender throughout India at the rate of Rs. 15 and Rs. 7½ respectively, and authorized the issue of currency notes in exchange for them. Along with placing the Indian currency on a gold basis, the Government was anxious to open a Mint for the free coinage of gold. But as the coin to be issued from the Mint was the English “sovereign” the Government of India was entirely in the hands of the British Treasury. According to the provisions of the English Coinage Act of 1870, it was necessary to issue a Royal Proclamation in order to constitute an Indian Mint a branch of the Royal Mint, a matter entirely dependent on the consent of the Treasury. It was the intention of the Government of India to announce the Proclamation simultaneously with the passing of the Act making the sovereign legal tender. Indeed it held back the legislation pending the arrival of the proclamation.† and proceeded with it reluctantly when it was advised that there was likely to be “some further delay over the Proclamation owing to legal and technical questions.” The objections raised by the Treasury, though merely technical, at first seemed to be quite insuperable,‡ and had it not been for the conciliatory attitude of the India Office the negotiations would have broken * See despatch dated July 25, 1899, No. 140 (Financial), C. 9421 of 1899. † Cf. the speech of the Hon. Mr. Dawkins on the Indian Coinage and Paper Currency Bill, dated September 8, 1899. ‡ Cf. H. of C. Return 495 of 1913, p. 14.

482 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES down. But the Treasury was not willing to give the project a chance. Just when a compromise was arrived at on the technical side of the question, the Treasury turned round and raised the question whether a Mint for gold coinage was at all necessary in India. The Treasury argued :— “While expressing their satisfaction that an agreement has now been reached, my Lords think it desirable, before practical steps are taken to carry out the scheme, to invite Lord George Hamilton to review the arguments originally advanced in favour of the coinage of the sovereign in India, and to consider whether the course of events, in the two years which have elapsed since the proposal was made, has not tended to diminish their force, and to render such advantages as are likely to accrue from the establishment of a branch Mint wholly incommensurate with the expense to be incurred... The gold standard is now firmly established, and the public requires no proof of the intention of the Indian Government not to go back on their policy, which is beyond controversy. Sovereigns are readily attracted to India when required under existing conditions... On the other hand the estimates of the Government of India of gold available for coinage in that country are less than was anticipated, nor is any considerable increase expected, at any rate for some time …… The staff would have to be maintained in idleness for a large part of the year, at a considerable cost to the Indian Exchequer... It is, of course, for Lord George Hamilton to decide whether, in spite of these objections, the scheme is to be proceeded with.” The India Office replied :— “The establishment of a Mint for the coinage of gold in India is the clearest outward sign that can be given of the consummation of the new currency system; and to abandon the proposal now must attract attention and provoke criticism and unrest ………. His Lordship is not inclined to abandon the scheme at the stage which it has now reached.”

483 TOWARDS A GOLD STANDARD The Treasury sent a trenchant rejoinder, in which it remarked:— “Indian currency needs are provided from other sources, and there is no real demand for the local coinage of sovereigns …… My Lords cannot believe that the position of the Gold Standard in India will be strengthened, or public confidence in the intention of the Government confirmed, by providing machines for obtaining gold coin …… The large measure of confidence already established is sufficiently indicated by the course of exchange since the Committee’s Report and still more by the readiness with which gold has been shipped to India ……” That the Treasury acted “in a spirit of scarcely veiled hostility to the whole proposal” is unmistakable. But it cannot be denied that the Treasury used arguments that were perfectly sound. It was inconsequential to the working of the gold standard whence the coined sovereigns came. So long as a Mint was open to the free coinage of sovereigns the Indian gold standard would have been complete irrespective of the location of the Mint. Indeed, to have obtained coined sovereigns from London would have not only sufficed, but would have been economical. The anxiety displayed by the government was not, however, on account of the want of a gold Mint. Indeed, so slight was its faith in the necessity of it that in view of the opposition of the Treasury it gracefully consented to drop the proposal. What troubled it most was the peculiar position of the rupee in the new system of currency. Throughout the despatch of the Government of India there ran a strain of regret that it could not see its way to demonetize the rupee and to assimilate the Indian currency to that prevailing in England. A general perusal of the despatch leaves the impression that though it recommended the assimilation of the Indian currency to that of France and the United States, it did so not because it thought that their systems furnished the best model, but because it believed that a better one was not within reach. Having regard to the accepted view of the French and the United States currency systems, it was natural that the Government of India did not feel very

484 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES jubilant about its own. According to that view of the currency systems of these two countries, the position of the five-franc piece and the silver dollar has always been presented as being very anomalous. Even so great an authority as Prof. Pierson was unable to assign them a place intelligible in the orthodox scheme of classifying different forms of money.* In a well-ordered system of gold standard of the orthodox type, gold is the only metal freely coined and the only one metal having full legal-tender power; silver, though coined, is coined only on Government account in limited amounts, and being of less intrinsic value than its nominal value, is a limited legal tender. The former type of coins are called standard coins and the latter subsidiary coins, and the two together make up the ideal of a monometallic gold standrd such as has been established in England since 1816. In a scheme of things like this, writers have found it difficult to fit in the dollar or the five-franc piece. Their peculiarity consists in the fact that although their intrinsic value is less than their nominal value they have been inconvertible and are also unlimited legal tender. It is owing to this anomaly that the title of gold standard has been refused to the American and French currency systems. Few can have confidence in what is called the limping standards in which it is said that somehow “the silver coin, though intrinsically of less value than the gold, hobbles along, maintained at equality by being coupled with its stronger associate.”‡ But was the French system of currency so very different from the English as to create doubt as to its stability ? Whatever may have been the differences between the two systems a closer analysis shows that they are fundamentally identical. If we read together the French bimetallic law of 1803 and the Mint Suspension Decree of 1878 on the one hand, and on the other the provisions of the English Gold Standard Act of 1816, * Cf. Principles of Economics, Vol. I, p. 569. † It was owing to this want of faith that Germany took away, by the law of October 1, 1907, the full legal-tender power from her silver thalers. In the United States the silver dollar is not legal tender if it is specifically excluded by the terms of a contract. Cf. A. C. Whitaker, Foreign Exchange, Appleton, New York, 1920, pp. 8. and 477. ‡ C. F. W. Taussig, Principles, 2nd ed., 1913, p. 280.

485 TOWARDS A GOLD STANDARD together with the Bank Charter Act of 1844, and compare, do we find any substantial difference between the French and English systems of currency? Prior to 1878 there was an unlimited issue in France of both gold and silver coins of unlimited legal tender. Prior to 1844 there was an unlimited issue in England of both gold sovereigns and Bank of England notes, both of unlimited legal tender, in 1844 England put a limit on the issue of bank notes, but did not deprive the issues of their legal-tender power.* In 1878 France did precisely the same thing as England did with her notes in 1844. By the decree of mint suspension, France virtually, though indirectly, put a limit on the silver five-franc coins without depriving them of their legal-tender power. If we regard the French five-franc coins as notes printed on silver, it is difficult to see what constitutes the difference between the two systems which leads economists to call one a gold standard and the other a limping standard. If the silver franc limps or hobbles along, so does the bank note, and the former can hobble better than the latter because of the two it has a comparatively greater intrinsic value. If, however, it is argued that the bank note is convertible into gold, while the five-franc piece is not, the reply is that the comparison must be made with the fiduciary notes of the bank of England. Those notes are practically inconvertible. For, at any given time, with the gold the Bank of England has in its Issue Department the fiduciary portion of the notes remains uncovered, and may, therefore, be regarded as inconvertible as the delimited issue of the five francs. But even if it is insisted that the fiduciary notes cannot be regarded as inconvertible as the five franc pieces, it must be pointed out that the similarity of the two is not to be determined by considerations of convertibility or inconvertibility. The attribute of convertibility with which the fiduciary notes of the Bank of England are endowed is a superfluous attribute which in no way improves their position as compared with the five-franc pieces. What makes them identical is the fact that they are both subjected to a fixed limit of issue. Thus viewed, the French limping standard and the English gold standard are * The Bank of England notes were made legal tender by Lord Althorpe’s Act of 1833.