Vol. 6 · pages 521–525

506 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES TABLE XXVII FINANCES OF THE GOVERNMENT Years. Surplus + Deficit — Years. Surplus + Deficit — Years. Surplus + Deficit — Years. Surplus + Deficit — Years. S u r p l u s + Deficit — Rs £ £ £ £ 1893-94 —1,546,998 1898-9 + 2,640,873 1903-4 + 2,996,400 1908-9 —3,737,710 1913-14 + 2,312,423 1894-95 + 693,110 1899-1900 + 2,774,623 1904-5 + 3,456,066 1909-10 + 606,641 1914-15 -1,785,270 1895-96 + 1,533,998 1900-1 + 1,670,204 1905-6 + 2,091,854 1910-11 +3,936,287 1915-16 -1,188,661 1896-97 —1,705,022 1901-2 + 4,950,243 1906-7 + 1,589,340 1911-12 + 3,940,334 1916-17 + 7,478,170 1897-98 —5,359,211 1902-3 + 3,069,549 1907-8 + 300,615 1912-13 + 3,107,634 — —

507 STABILITY OF THE EXCHANGE STANDARD period was founded not upon production, but upon depredation made possible by the inflation of currency. Similarly it cannot be granted without reserve that the new currency system must be good because it has obviated the burden of the gold payments and given relief to the Indian taxpayer. Such a view involves a misconception of the precise source of the burden of India’s gold payments during the period of falling exchange. It has been widely held that the burden of gold payments was caused by the fall in the gold value of silver, a view which carried with it the necessary implication that if India had been a gold-standard country she would have escaped that heavy burden. That it is an erroneous view hardly needs demonstration.* It is not to be denied that India bore an extra burden arising from the increased value of the gold payments. But what is not sufficiently realized is that it was a burden which weighed on all gold debtors irrespective of the question whether their standard was gold or silver. In this respect the position of a gold-standard country like Australia was not different from a silver-standard country like India. In so far as they were gold debtors they suffered each in the same way from the same cause, namely the appreciation of the standard in which their debts were measured. The fact that one discharged her debts in gold and the other in Silver made no difference in their condition, except that the use of silver by India to discharge her debts served as a refractory medium through which it was possible to see the magnitude of the burden she bore. The fall of silver measured and not caused the burden of India’s gold payments. The arrest in the fall of the rupee cannot be accepted as a prima facie proof of a relief to the taxpayer and therefore an evidence of the soundness of the currency system. It is possible that the benefit may have been too dearly paid for. Although favourably impressed by the increase of trade and the buoyancy of Government finances under the exchange standard, the Chamberlain Commission did not care to found its case for it on the basis of such arguments. The chief ground on which it rested was that the currency system was capable of maintaining the exchange value of the rupee at a fixed par with gold.† We must therefore proceed to examine this claim made by the Commission on behalf of the exchange standard. The table No. XXVIII presents the requisite data for an elucidation of the question. * Cf. evidence of Prof. Marshall before the Gold and Silver Commission, 1886 Q. 10,140-50. † Report, pp. 18 and 20.

508 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES TABLE XXVIII Gold Value of the Rupee As expressed in Terms of Foreign Exchange Bates on London. Par R. = ls. 4d. As expressed in Terms of Gold. Years. (1) Rupee Price of Sovereigns. Par Rs. 15 = 1 Sovereign. (2) Rupee Price of Bar Gold Par Tola = Rs. 23-14-4. Years. Highest. Lowest. Highest. Lowest. Highest. Lowest. s. d. s. d. Rs. A. P. Rs. A. P. Rs. A. P. Rs. A. P. 1892-93 1 3.969 1 2.625 1893 16 10 6 15 6 0 26 11 0 24 14 0 1893-94 1 4.031 1 1.500 1894 19 0 0 16 1 0 32 4 0 25 9 0 1894-95 1 1.906 1 0.000 1895 19 5 0 18 2 6 30 8 0 27 6 0 1895-96 1 2.875 1 1.000 1896 17 7 0 16 1 0 27 13 6 27 2 0 1896-97 1 3.842 1 1.781 1897 16 10 0 15 3 0 26 12 6 25 4 0 1897-98 1 4.125 1 2.250 1898 15 7 0 15 1 0 24 10 0 24 0 0 1898-99 1 4.156 1 3.094 1899 15 4 0 15 0 0 24 2 0 23 4 0 1899-1900 1 4.375 1 3.875 1900 15 1 3 15 0 0 24 2 0 23 15 6 1900-1901 1 4.156 1 3.875 1901 15 0 0 15 0 0 24 2 0 24 0 0 1901-1902 1 4.125 1 3.875 1902 15 4 6 15 2 6 24 2 6 24 0 0 1902-1903 1 4.156 1 3.875 1903 15 3 0 15 1 6 24 3 0 24 0 0 1903-1904 1 4.156 1 3.875 1904 15 5 0 15 1 3 24 2 0 24 0 3 1904-1905 1 4.156 1 3.970 1905 15 4 0 15 1 6 24 2 0 24 0 0 1905-1906 1 4.156 1 3.937 1906 15 1 0 15 2 0 24 4 6 24 0 0 1906-1907 1 4.187 1 3.937 1907 15 4 0 15 0 0 24 4 0 23 15 6 1907-1908 1 4.187 1 3.875 1908 15 1 0 15 0 0 24 10 0 24 2 0 1908-1909 1 4 1 3.875 1909 Premium between 12 and 3% 24 3 6 23 15 0 1909-1910 1 4.156 1 3.875 1910 15 5 0 15 0 0 24 4 0 23 15 0 1910-1911 1 4.156 1 3.87b 1911 15 0 0 15 0 0 24 0 6 23 14 0 1911-1912 1 4.156 1 3.937 1912 15 0 0 15 0 0 24 0 0 23 14 0 1912-1913 1 4.156 1 3.970 1913 15 0 0 15 0 0 24 0 3 — 1913-1914 1 4.156 1 3.937 1914 15 14 0 15 2 0 26 10 0 23 15 6 1914-1915 1 4.094 1 3.937 1915 15 13 6 15 5 0 25 14 0 24 8 0

509 STABILITY OF THE EXCHANGE STANDARD Assuming, for the moment, the criterion laid down by the Commission to be correct, can it be said from the data given above that the rupee has maintained its gold value ? It would be overconfident if not rash to say that the system, even from the narrow point of view of the Commission, has been an unquestioned success. Between June, 1893, and January, 1917, the rupee was rated to gold at the rate of 1 rupee equal to 7.53344 troy grs. of fine gold. At that rate the sovereign should be equal to 15 rupees, the mint price of gold should be Rs. 23-14-4 per tola (i.e. 180 grs.) of bar gold 100 touch, and the exchange on London should be 1s. 4d., and should have varied within 1s. 4.125 d., the import point, and 1s. 3.906 d., the export point, for gold. Taking a general survey of the stability of the rupee with regard to its value in terms of gold, it will be noticed that from the date of the Mint closure up to 1898 the rupee was far below par. The depreciation of the rupee, measured in terms of exchange or price of gold or sovereign, ranged somewhere between 25 to 30 per cent. So great was the depreciation that it redoubled the difficulties confronting the Government when the rupee was not fixed to gold. The financing the Home Treasury by the usual means of selling Council Bills became well-nigh impossible.* The Secretary of State found himself in an embarrassing position. Offering to sell below par involved the obloquy of having led the way to the defeat of the policy of stabilizing exchange. Refusing to sell at market rates involved the danger of a dry Treasury. The Government of India suggested that the Secretary should lay down a minimum rate for or a maximum amount of the bills that he put upon the market. The Secretary of State agreed to neither, but consented to reduce his drawings so as not to unduly depress the exchange rate. The drawings of the secretary of State during the first fiscal year since the Mint closure have been the smallest on record :— TABLE XXIX Council Drawings Date of drawing Amount of Drawings £ 1,000 omitted Rate at which drawn (Pence per Rupee) 1893. June ... 2,478 15.039 July ... 25 15.974 August ... 78 15.243 September ... 7 15.350 October ... 5 15.334 November ... 617 15.251 December ... 14 15.242 1894. January ... 98 14.408 February ... 1,023 13.787 March ... 1,915 13.870 April ... 1,368 13.626 * See Commons Paper 7 of 1894, East India (Currency and Sale of Bills).

510 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES The curtailment of drawings to save the rate of exchange from being lowered was not an unmitigated good, for it imposed the necessity of a resort to the by no means inexpensive method of sterling borrowings to finance the Home Treasury.* The remittances by drawings fell short of the net disbursements of the Home Treasury in 1893-94 by £6,588,000, which deficit was met by permanent sterling borrowings to the extent of £7,430,000, the interest on which added to the already overheavy burden of the gold payments. Rather than incur such a penalty the Secretary of State gave up the attempt to dominate the market and preferred to follow it. But this letgo policy was not without its cost. The drop in the exchange below 1s. 4d. added to the burden of remittances to the Home Treasury, and also compelled the Government to grant exchange compensation allowance to its European officers, civil and military—an aid which it had so far withheld. The cost to the Government involved by the fall of the rupee below par was quite a considerable sum.† TABLE XXX Cost of the Fall of the Rupee Years Loss on Council Bills being sold below par Loss by Exchange Compensation Allowance Loss by Increase of Pay of British Troops Total on each Account in each Year Total on all Counts for three Years In Rupees In Sterling at 1s. 4d. Rs. £ 1894-95 ... 3,74,15,000 78,02,000 37,84,000 4,90,01,000 1895-96 ... 3,05,91,000 87,18,000 49,38,000 4,42,47,000 11,91,86,000 7,945,733 1896-97 ... 1,66,48,000 48,95,000 44,25,000 2,59,38,000 In the midst of such a situation it is no wonder if the faith of the Government in the ultimate stability of the rupee had given way, for we find that in October, 1896, the Financial Member of the Council had personally come to the conclusion that it would be better in the interest of stability to substitute 15d. for 16d. as the par of exchange between the rupee and gold.‡ But the suggestion was dropped as the rupee showed signs of reaching the gold par, which it did in January, 1898, after a period of full five years of depreciation from the established par. * Evidence of Sir H. Waterfield before the Fowler Committee, Q. 4,332-39. † Evidence of Hon. A. Arthur before the Fowler Committee. Q. 1,806-7. ‡ Cf. Shirras, Indian Finance and Banking, p. 168.