Vol. 6 · pages 551–555

536 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES silver on private account into India was prohibited on September 3, 1917. This measure, however, removed only a few of the smaller competitors for the world’s diminished supply of silver, and the world-demand remained so heavy that the Secretary of State was unable to obtain sufficient supply notwithstanding the great conservation effected in the use of silver by substituting nickel coinage for silver coins of subsidiary order,* and by the isue of notes of denominations as low as that of R. 1† and of R. 2-8.‡ The Government of the United States was therefore approached on the subject of releasing a portion of the silver dollars held in their reserve. The American Government consented and passed the Pittman Act, under which the Government of India acquired a substantial volume at 101½ cents per fine ounce. The total silver purchased during this period was as follows :— TABLE XLIV RUPEE COINAGE, 1915—20 Year Silver purchased in Open Market, Standard Ounces. Silver purchased from U. S. A., Standard Ounces. Total Standard Ounces. 1915-16 ... ... 8,636,000 ... ... 1916-17 ... ... 124,535,000 ... ... 1917-18 ... ... 70,923,000 ... ... 1918-19 ... ... 106,410,000 152,518,000 ... 1919-20 ... ... 14,108,000 60,875,000 ... Total 324,612,000 213,393,000 538,005,000 Now, recalling the fact that from 1900 to 1914 the Government had coined about 532 million standard ounces of silver,§ it means that the coinage of silver by Government during these five years exceeded the amount coined in the fourteen preceding years by five million ounces. * Act IV of 1918 and XXI of 1919. † First issued on December 1, 1917. ‡ First put into circulation on January 2, 1918. § Cf. the figures given by L. Abrahms in his evidence to the Currency Committee of 1919.—Mit. of Evid., Q. 37-41.

537 STABILITY OF THE EXCHANGE STANDARD Thus the fall in the gold value of the rupee is an inevitable consequence of the exercise of the power to issue inconvertible currency in unlimited quantities. This is the fate of all inconvertible currencies known to history. But it is said that an exception must be made in the case of the rupee currency, for if the Government has the liberty of issuing it in unlimited quantities it has also resources to counteract the effects of a fall when it does occur. We must therefore turn to an examination of these resources. The basis of the reasoning is that the rupee is a token currency, and that if the value of a token currency is maintained at par with gold by applying to it the principle of redemption into gold* it should be possible to maintain the value of the rupee at par with gold by adopting a similar mechanism. What is wanted is an adequate gold fund, and so long as the Government has it, we are assured that we need have no anxiety on the score of a possible fall in the value of the rupee. Such a fund the Government of India has, and on all the three occasions when the gold value of the rupee fell below par that fund was operated upon. The process of redemption is carried on chiefly in three ways : (1) The sale of what are called reverse councils, by which the Government receives rupees in India in return for gold in London ; (2) the release of gold internally in; receipt for rupees in India ; and (3) the stoppage of the Secretary of State’s council bills to prevent further rupees from going into circulation. The cumulative effect of these, it is said, is to contract the currency and raise its value to par. Although all the three may be employed, the first is by far the most important means adopted by the Government in carrying through this process of redemption. The extent of the redemption effected on the three occasions when it was employed may be seen from the three following tables :— * See the very interesting discussion by Laughlin of the laws of token money in his Principles of Money, Chap. XV. It may be said in passing that Laughlin is an opponent of the quantity theory of money, but in his discussion of token money he virtually admits it.

538 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES I. REDEMPTION OF CURRENCY, 1907-8 TABLE XLV Date By the sale of Reverse Councils By Release of Gold- Diminution of Govt. Stock of Gold during the Month. Private Export of Gold Coin during the Month. Drawings of the Secretary of State. Amount offered Amount sold ££ ££ £ 1907— September ... ... ... 152,000 14 858,896 October ... ... ... 254,000 9,109 921,678 November ... ... ... 532,000 3 427,344 December ... ... ... 338,000 2,501 571,905 1908— March 26 ... 500,000 70,000 226,000 ... 172,669 (for the whole month) April 2 ... 500,000 449,000 ” 9 ... 500,000 340,000 ” 16 ... 500,000 441,000 461,000 ... 66,834 ” 23 ... 500,000 329,000 ” 30 ... 500,000 205,000 May 7 ... 500,000 81,000 ” 14 ... 500,000 145,000 645,000 ... 62,764 ” 21 ... 820,000 793,000 ” 28 ... 500,000 500,000 June 4 ... 1,000,000 755,000 ” 11 ... 1,000,000 70,000 334,000 ... 169,810 ” 18 ... 500,000 Nil ” 25 ... 500,000 50,000 July 2 ... 500,000 470,000 ” 9 ... 500,000 304,000 ” 16 ... 500,000 500,000 16,000 ... 186,847 ” 23 ... 1,000,000 968,000 ” 30 ... 1,000,000 860,000 Aug. 6 ... 1,000,000 418,000 ” 13 ... 500,000 310,000 354,000 ... 262,217 ” 20 ... 500,000 Nil ” 27 ... 500,000 Nil Sept. 3 ... 500,000 Nil 502,000 ... 1,431,012 ” 10 ... 500,000 Nil Total ... 15,320,000 8,058,000 4,394,000 249,942

539 STABILITY OF THE EXCHANGE STANDARD II. R EDEMPTION IN 1914-16 TABLE XLVI Date Reverse Councils (in £ 000) Drawings of the S. of S. (in Lakhs of Rs.) 1914. April ... ... Nil 270 May ... ... ” 61 June ... ... ” 68 July ... ... ” 66 August ... ... 2,778 72 September ... ... 1,515 25 October ... ... 1,895 41 November ... ... 1,044 32 December ... ... 1,250 30 1915. January ... ... 225 29 February ... ... Nil 181 March Total ... ” 287 8,707 1,162 1915. April ... ... Nil 1,53 May ... ... ” 1,03 June ... ... 651 17 July ... ... 3,377 8 August ... ... 815 23 September ... ... 50 2,17 October ... ... Nil 2,25 November ... ... ” 2,02 December ... ... ” 3,28 1916. January ... ... ” 5,26 February ... ... ” 6,02 March Total ” 6,33 ... 4,893 30,37

540 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES III. R EDEMPTION IN 1920 TABLE XLVII SALE OF REVERSE COUNCILS (FIGURES IN THOUSANDS OF POUNDS) Date of sale. Amount offered at each Sale. Amount applied for at each Sale. Amount sold at each Sale. Progressive Total of Amount sold. 1920. January 2 ... 1,000 770 770 770 ” 8 ... 1,000 8,499 990 1,760 ” 15 ... 2,000 300 300 2,060 ” 22 ... 2,000 4,890 2,000 4,060 ” 29 ... 2,000 1,334 5,000 5,394 February 5 ... 2,000 32,390 2,000 7,394 ” 12 ... 2,000 41,312 2,000 12,394 ” 19 ... 2,000 122,335 2,000 14,394 ” 26 ... 2,000 78,417 2,000 16,394 March 3 ... 2,000 64,931 2,000 18,394 ” 11 ... 2,000 117,185 2,000 20,394 ” 18 ... 2,000 153,559 2,000 22,394 ” 25 ... 2,000 56,295 2,000 24,394 ” 31 ... 2,000 35,050 1,988 26,382 April 1 ... ” 8 ... 2,000 16,721 2,000 28,382 ” 15 ... 2,000 48,270 2,000 30,382 ” 22 ... 2,000 59,020 2,000 32,382 ” 29 ... 1,000 53,210 1,000 33,382 May 6 ... 1,000 89,514 1,000 34,382 ” 13 ... 1,000 101,625 1,000 35,382 ” 20 ... 1,000 122,279 1,000 36,382 ” 26 ... 1,000 85,620 1,000 37,382 June 3 ... 1,000 101,821 1,000 38,382 ” 10 ... 1,000 109,245 1,000 39,382 ” 15 ... 1,000 122,991 1,000 40,382 ” 24 ... 1,000 73,391 1,000 41,382 July 1 ... 1,000 106,751 1,000 42,382 ” 8 ... 1,000 63,690 1,000 43,382 ” 15 ... 1,000 101,830 1,000 44,382 ” 22 ... 1,000 103,960 1,000 45,382 ” 29 ... 1,000 75,486 1,000 46,382 August 5 ... 1,000 101,260 1,000 47,382 ” 12 ... 1,000 112,230 1,000 48,382 ” 19 ... 1,000 114,767 1,000 49,382 ” 26 ... 1,000 117,390 1,000 50,382 Sept. 2 ... 1,000 126,425 1,000 51,382 ” 7 ... 1,000 117,200 1,000 52,382 ” 13 ... 1,000 115,095 1,000 53,382 ” 21 ... 1,000 122,590 1,000 54,382 ” 28 ... 1,000 120,050 1,000 55,382