Vol. 6 · pages 531–535

516 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES TABLE XXXIV ACTUAL GOLD VALUE OF THE RUPEE AND THE NEW PARITY IN TERMS OF FOREIGN EXCHANGES As in the Middle of the Month of— New York on Bombay in cents. Bombay on London in s. d. 1920. 1921. 1922. 1920. 1921. 1922. Par Rate. Actual Rate. Par Rate. Actual Rate. Par Rate. Actual Rate. Par Rate. Actual Rate. Par Rate. Actual Rate. Par Rate. Actual Rate. January . 0.4866 0.4400 0.4866 0.2925 0.4866 0.2800 2 7½ 2 3 5/8 2 7 5/16 1 5 5/8 2 3 5/8 1 3 1/13/6 February . 0.4866 0.4850 0.4866 0.2800 0.4866 0.2845 2 10 3½ 2 9 1/8 2 5 1/13/6 1 4 1/8 2 2 7/32 1 3 9/16 March . . 0.4866 0.4850 0.4866 0.2625 0.4866 0.2787 2 7 2/39/2 2 5 3/4 2 5 3/31/2 1 3 1/4 2 2 2/39/2 1 3 5/16 April . . 0.4866 0.4775 0.4866 0.2625 0.4866 0.2785 2 5 7/16 2 3 3/4 2 5 1/13/6 1 3 5/8 2 2½ 1 3 1/8 May . . . 0.4866 0.4325 0.4866 0.2675 0.4866 0.2930 2 6 1/39/2 2 2 1/8 2 5 7/32 1 3 1/2 2 2¼ 1 3 9/16 June . . 0.4866 0.4125 0.4866 0.2525 0.4866 0.2900 2 5 3/31/2 1 10 1/13/6 2 6 2/39/2 1 3 3/8 2 2 1/8 1 3 1/39/2 July . . . 0.4866 0.3900 0.4866 0.2400 0.4866 0.2900 2 5 3/31/2 1 8 1/16 2 8 9/32 1 3¼ 2 2 5/8 1 3 5/8 August . . 0.4866 0.3650 0.4866 0.2475 0.4866 0.2916 2 8 9/32 1 10 1/16 2 7 2/39/3 1 4 3/4 2 2 3/16 1 3 1/39/2 September . 0.4868 0.3325 0.4866 0.2675 0.4866 0.2875 2 9 9/16 1 10 1/16 2 7 1/35/2 1 5 1/16 2 2 6/16 1 3 9/16 October . 0.4866 0.3025 0.4866 0.2825 0.4866 — 2 9 2/31/2 1 7 3/4 2 6 1/32 1 5 7/16 — — November . 0.4866 0.3025 0.4866 0.2695 0.4866 — 2 10 9/16 1 7 1/8 2 5 1/36/2 1 4 1/8 — — December . 0.4866 0.2650 0.4866 0.2775 0.4866 — 2 9 9/16 1 5 1/4 2 4 1 3 7/8 — —

517 STABILITY OF THE EXCHANGE STANDARD TABLE XXXV GOLD VALUE OF THE RUPEE AND THE NEW PARITY IN TERMS OF THE PRICE OF SOVEREIGNS AND GOLD Months 1920 1921 1922 Price of British Sovereigns Par 10 Rs. = 1 Sov. Price of Bar Gold per Tola 100 touch Par Rs. 15-14-10 = 1 Tola Price of British Sovereigns Par 10 Rs. = 1 Sov. Price of Bar Gold per Tola 100 Touch Par Rs. 15-14-10 =1 Tola Price of British Sovereigns Par 10 Rs. = 1 Sov. Price of Bar Gold per Tola 100 touch Par Rs. 15-14-10 =1 Tola Rs. A. P. Rs. A. P. Rs. A. p. Rs. A. P. Rs. A. p. Official Figures not yet published January ... Nominal 28 0 0 Nominal Official Figures not yet published 17 14 0 February ... ” 22 0 0 ” 17 14 0 March ... ” 24 0 0 ” 17 14 0 April ... ” 24 8 0 18 12 0 ... May ... ” 22 12 0 19 0 0 ... June ... ” 22 4 0 19 12 0 ... July ... ” 23 0 0 20 9 0 ... August ... ” 21 8 0 20 9 0 ... September ... ” 25 4 0 19 2 0 ... October ... ” 27 6 0 18 14 0 ... November ... ” 28 10 0 18 8 0 ... December ... ” 27 12 0 18 6 0 ... The only scientific explanation sufficient to account for the fall of the rupee would be to say that the rupee had lost its general purchasing power. It is an established proposition that a currency or unit of account will be valued in terms of another currency or unit of account for what it is worth, i.e. for the goods which it will buy. To take a concrete example, Englishmen and others value Indian rupees inasmuch and in so far as those rupees will buy Indian goods. On the other hand, Indians value English pounds (and other units of account, for that matter) inasmuch and in so far as those pounds will buy English goods. If rupees in India rise in purchasing power (i.e. if the Indian prices level falls) while pounds fall in purchasing power or remain stationery or rise less rapidly (i.e. if the English price level rises relative to the Indian price-level), fewer rupees would be worth as much as pound, i.e. the exchange value of the rupee in terms of the pound will rise. On the other hand, if rupees in India fall in purchasing power (i.e. if the Indian price-level rises) while pounds rise in purchasing power or remain stationary or fall less rapidly (i.e. if the English price-level falls relative to the Indian price-level), it will take more rupees to be worth as much as a pound, i.e. the exchange value of the rupee in terms of the pound will fall.

518 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES On the basis of this theory the real explanation for a fall in the Indian exchange should be sought for in the movement of the Indian price-level. Lest there be any doubt regarding the validity of the proposition let us take each of the occasions of the fall and find out whether or not the fall was coincident with the fall in the purchasing power of the rupee.* TABLE XXXVI PERIOD I, 1890-99 Years Currency in Rupees Circulation + Notes Index Number of prices in India 1890-94=100 Index Number of prices in England 1890-94 = 100 Amount in Crores of Rs. Index Number 1890-94 = 100 (1) (2) (3) (4) (5) 1890 ... 120 92 113 104 1891 ... 131 100 106 105 1892 ... 141 108 100 99 1893 ... 132 101 96 99 1894 ... 129 99 85 93 1895 ... 132 101 89 90 1896 ... 127 97 99 89 1897 ... 125 96 120 90 1898 ... 122 93 109 91 1899 ... 131 100 108 94 TABLE XXXVII PERIOD II, 1900-1908 Years Currency in Rupees Circulation + Notes Index Number of prices in India 1890-94 = 100 Index Number of prices in England 1890-94=100 Amount in Crores of Rs. Index Number 1890-94 = 100 (1) (2) (3) (4) (5) 1900 ... 134 103 126 103 1901 ... 150 115 120 98 1902 ... 143 109 115 96 1903 ... 147 113 111 97 1904 ... 152 116 110 100 1905 ... 164 126 120 100 1906 ... 185 142 134 107 1907 ... 190 145 138 113 1908 ... 181 139 147 104 * The figures for the following tables are taken, unless otherwise stated, from the Report of the Price Inquiry Committee, Calcutta, 1914.

519 STABILITY OF THE EXCHANGE STANDARD TABLE XXXVIII PERIOD III, 1909-14* Years Currency in Rupees Circulation + Notes Index Number of prices in India 1890-94 = 100 Index Number of prices in England 1890-94 = 100Amount in Crores of Rs. Index Number 1890-94 = 100 (1) (2) (3) (4) (5) 1909 ... 198 152 138 105 1910 ... 199 152 137 110 1911 ... 209 160 139 114 1912 ... 214 164 147 117 1913 ... 238 182 152 124 1914 ... 237 182 156 124 * Figures for 1913 and 1914 are those of Mr. Shirras given in the Appendix to his Indian Finance and banking. Figures in column 3 are calculated from his figures. TABLE XXXIX PERIOD IV, 1915-1921* Years Currency in Rupees Circulation + Notes Index Number of prices in India 1913=100 Index Number of prices in England 1913=100 Amount in Crores of Rs. Index Number 1913 = 100 (1) (2) (3) (4) (5) 1915 ... 266 104 112 127.1 1916 ... 297 116 125 159.5 1917 ... 338 132 142 206.1 1918 ... 407 155 178 226.5 1919 ... 463 180 200 241.9 1920 ... 411 160 209 295.3 1921 ... 393 114 183 182.4 * Index numbers of prices are taken from the League of Nations Memorandum on Currency, 1913-1921, 2nd Ed. (1922). Table VIII. Figures for Circulation are taken from H. S. Jevon’s. The Future of Exchange and Indian Currency, 1922, p. 44, Index numbers of circulation are calculated.

520 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES Now do these tables confirm, or do they not, the argument that the fall in the gold value of the rupee is coincident with a fall in the general purchasing power of the rupee ? What was the general purchasing power of the rupee when a fall in its gold value occurred ? If we scrutinize the facts given in the above tables in the light of this query there can be no doubt as to the validity of this argument. From the tables it will be seen that the gold value of the rupee improved between 1893-1898 because there was a steady, if not unbroken, improvement in its general purchasing power. Again, on the subsequent occasions when the exchange fell, as it did in 1908, 1914, and 1920, it will be observed that those were the years which marked the peaks in the rising price-level in India ; in other words, those were the years in which there was the greatest depreciation in the general purchasing power of the rupee. A further proof, if it be needed, of the argument that the exchange value of the rupee must ultimately be governed by its general purchasing power is afforded by the movements of the rupee-sterling exchange since 1920 (see Table XL). But, although such is the theoretical view confirmed by statistical evidence of the causes which bring about these periodic falls in the gold value of the rupee (otherwise spoken of as the fall of exchange), it is not shared by the Government of India. The official explanation is that a fall in the gold value of the rupee is due to an adverse balance of trade. Such is also the view of eminent supporters of the exchange standard like Mr. Keynes* and Mr. Shirras.† No doubt, some such line of reasoning is responsible for the currency fiasco of 1920. How is it possible otherwise to explain the policy of raising the exchange value of the rupee ? Both the Smith Committee on Indian Currency‡ and the Government of India§ were aware of the fact that the rupee was heavily depreciated, as evidenced by the rise of prices in India. *Op. cit., p. 16. † op. cit, p. 4. ‡Cf. Report, pp. 19-21. § Memorandum from the Government regarding Indian price movements. App. XXVIII to the Report of the Currency Committee of 1919.