Vol. 6 · pages 591–595

576 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES economy and so reckless was it with considerations of stability of value, that it actually proposed a change in the basis of the Indian paper currency from a fixed issue system to that of a fixed proportion system.* That, at the dictates of considerations of economy, the Commission should have neglected to take account of this aspect of the question, is only one more evidence of the very perfunctory manner in which it has treated the whole question of stability of purchasing power so far as the Indian currency was concerned. If there is any force in what has been urged above, then surely a gold currency is not a mere mattter of “sentiment” and a “costly luxury,” but a necessity dictated by the supreme interest of steadying the Indian standard of value, and thereby to some extent, however slight, safeguarding the welfare of the Indian people from the untoward consequences of a rising price-level. We now see how very wrong the Chamberlain Commission was from every point of view in upholding the departure from the plan originally outlined by the Government of India and sanctioned by the Fowler Committee. But that raises the question : How did that ideal come to be so ruthlessly defeated ? If the Fowler Committee had proposed that gold should be the currency of India, how is it that gold ceased to be the currency ? It cannot be said that the door is closed against the entry of gold, for it has been declared legal tender. Speaking in the language of Prof. Fisher, the movement of gold in the money reservoir of India is allowed a much greater freedom so far as law is concerned than can be said of silver. Silver, in the form of rupees, is admitted by a very narrow valve which gives it an inlet into that reservoir, but there is no outlet provided for it. On the other hand, gold is admitted into the same reservoir by a pipe-connection which gives it an inlet as well as an outlet. Why, then, does not gold flow into the currency reservoir of India ? A proper understanding on this question is the first step towards a return to the sound system proposed in 1898. On an examination of the literature which attempts to deal with this aspect of the question, it will be found that two explanations are usually advanced to account for the non-entry of gold into the currency system of India. One of them is the sale of council bills by the Secretary of State. The effect of the sale of council bills, it is said, is to prevent gold from going to India. Mr. Subhedar, said to be an authority on Indian currency, * Report, Sec. 112.

577A RETURN TO THE GOLD STANDARD in his evidence before the Smith Committee (Q. 3,502), observed:— “Since 1905 it has been the deliberate attempt of those who control our currency policy to prevent gold going to India and into circulation.” The council bill has a history which goes back to the days of the East India Company.* The peculiar position of the Government of India, arising from the fact that it receives its revenues in India and is obliged to make payments in England, imposes upon it the necessity of making remittances from India to England. Ever since the days of the East India Company the policy has been to arrange for the remittance in such a way as to avoid the transmission of bullion. Three modes of making the remittance were open to the Directors of the East India Company: (1) sending bullion from India to England; (2) receiving money in England in return for bills on the Government of India; and (3) making advances to merchants in India for the purchase of goods consigned to the United Kingdom and repayable in England to the Court of Directors of the Company to whom the goods were hypothecated. Out of these it was on the last two that greater reliance was placed by them. In time the mode of remittance through hypothecation of goods was dropped” as introducing a vicious system of credit, and interfering with the ordinary course of trade.” The selling of bills on India survived as the fittest of all the three alternatives,† and was continuned by the Secretary of State in Council— hence the name, council bill—when the Government of India was taken over by the Crown from the Company. In the hands of the Secretary of State the council bill has undergone some modifications. The sales as now effected are * Cf. the Memorandum by Sir Henry Waterfield relating to the system of effecting remittances from India, Appendix to the Fowler Committee’s Report, p. 24 ; also memorandum by F. W. Newmarch on the Sale of Council Bills and Telegraphic Transfers. Appendices to the Interim Report of the Royal Commission on Indian Finance and Currency, Vol. I, No. VIII, p. 217. † There was a fourth one, viz., the Government of India purchasing sterling bills in India on London and sending them to the Secretary of State for collection. It was employed for a short period of time in 1877, but was afterwards dropped.

578 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES weekly sales,* and are managed through the Bank of England, which issues an advertisement on every Wednesday on behalf of the Secretary of State for India, inviting tenders to be submitted on the following Wednesday for bills payable on demand by the Government of India either at Bombay, Madras, or Calcutta. The minimum fraction of a penny in the price at which tenders of bills are received has now† been fixed at 132 nd of a penny. The council bill is no longer of one species as it used to be. On the other hand there are four classes of bills: (1) ordinary bills of exchange, sold every Wednesday, known as “Councils”; (2) telegraphic transfers, sold on Wednesdays, called shortly “ Transfers”; ‡ (3) ordinary bills of exchange, sold on any day in the week excepting Wednesday, called “Intermediates”; and (4) telegraphic transfers, sold on any day excepting Wednesday, named “Specials.” Now, in what way does the Secretary of State use his machinery of council bills to prevent gold from going to India ? It is said that the price and the magnitude of the sale are so arranged that gold does not go to India. Before we examine to what extent this has defeated the policy of the Fowler Committee, the following figures (Tables LI and LII, pp. 579 and 582) are presented for purposes of elucidation. From an examination of these tables two facts at once become clear. One is the enormous amount of council bills the Secretary of State sells. Before the closing of the Mints the sales of council bills moved closely with the magnitude of the home charges, and the actual drawings did not materially deviate from the amount estimated in the Budget. Since the closure of the Mints the drawings of the Secretary of State have not been governed purely by the needs of the Home Treasury. Since the closure, the Secretary of State has endeavoured§ :— “(1) To draw from the Treasuries of the Government of India during the financial year the amount that is laid down in the Budget as necessary to carry out the Ways and Means programme of the year. * From January 22, 1862, when the Sale of Council Bills under the authority of the Secretary of State first took place, up to November, 1862, the sales were effected monthly. From November, 1862, the sales were effected fortnightly ; and in August, 1876, they were made weekly. † From January to march, 1862, the minimum fraction was a farthing ; it was reduced to 1/8 th of a penny in March 1862, to 1/16th in January 1875, and to 1/32nd in 1882, at which fraction it has continued since then. ‡ First introduced in 1876. § Cf. Memorandum on the Sale of Council Bills, by F. W. Newmarch, to the Chamberlain Commission, App. Vol. I, No. VII. p. 222.

579A RETURN TO THE GOLD STANDARD TABLE LI BALANCE OF TRADE, COUNCIL DRAWINGS AND IMPORTS OP GOLD BEFORE 1893 Years. Balance of Trade (Mer- chandise : Private Account). Net Imports of Treasure. Amount of Council-Bills drawn. Excess ( +) or De ciency (—) of Bills drawn as compared with Budget Estimate. Home Charges. Cash Balances in the Home Treasury. Minimum Rate for Council Bills.Gold. Silver. (1) (2) (3) (4) (5) (6) (7) (8) (9) £ £ 000,000 £ 000,000 £ £ £ £ s. d. 1870-71 20,863,000 2.13 .9 — — 10,031,261 3,305,972 1 10 14 1871-72 31,094,000 3.43 6.3 — — 9,703,235 2,821,091 1 10 38 1872-73 23,376,000 2.41 .7 13,939,095 + 939,095 10,248,605 2,998,444 1 10 38 1873-74 21,160,000 1.29 2.3 13,285,678 - 214,322 9,310,926 2,013,638 1 9 12 1874-75 20,137,000 1.73 4.3 10,841,615 + 841,615 9,490,391 2,796,370 1 9 34 1875-76 19,204,000 1.40 1.4 12,389,613 -1,910,387 9,155,050 919,899 1 9 1876-77 23,573,000 .8 6.1 12,695,800 - 964,200 13,851,296 2,713,967 1 6 12 1877-78 23,758,000 .1 12.7 10,134,455 -2,115,545 14,048,350 1,076,657 1 8 316 1878-79 23,167,000 .4 3.3 13,948,565 -3,051,435 13,851,296 1,117,925 1 6 58 1879-80 26,046,000 1.45 6.5 15,261,810 + 261,810 14,547,664 2,270,107 1 7 1880-81 21,464,000 3.03 3.2 15,239,677 -1,660,323 14,418,986 4,127,749 1 7 12 1881-82 32,855,000 4.02 4.5 18,412,429 + 1,212,429 14,399,083 2,620,909 1 7 38 1882-83 31,389,000 4.01 6.1 15,120,521 - 221,479 14,101,262 3,429,874 1 7 1883-84 23,611,600 4.44 5.2 17,599,805 + 1,299,805 15,030,195 4,113,221 1 7 78 1884-85 20,034,100 3.76 5.8 13,758,909 -2,741,091 14,100,982 2,249,378 1 6 34 1885-86 21,344,200 2.10 8.8 10,292,692 -3,481,008 14,014,733 4,726,58 1 5 78 1886-87 19,844,800 1.58 5.2 12,136,279 -1,195,121 14,409,949 5,280,829 1 4 18 1887-88 18,724,400 2.10 6.5 15,358,577 - 891,423 15,389,065 5,900,697 1 4 38 1888-89 20,271,900 1.92 6.3 14,262,859 + 262,859 14,983,221 3,259,933 1 4 1889-90 24,557,800 318 7.6 15,474,496 + 784,596 14,848,923 5,402,873 1 4 1890-91 20,733,800 4.25 10.7 15,969,034 + 980,034 15,568,875 3,885,050 1 4 1516 1891-92 27,632,400 1.68 6.3 16,093,854 + 93,854 15,874,699 4,122,626 1 3 1 16 1892-93 29,287,300 1.75 8.0 16,532,215 - 467,785 16,334,541 12,268,388 1 2 5 8

580 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES “(2) To draw such further amounts as may be required to pay for purchases of silver bought for coinage purposes. “(3) To draw such further amounts as an unexpectedly prosperous season may enable the Government to spare, to be used towards the reduction or avoidance of debt in England. “(4) To sell additional bills and transfers to meet the convenience of trade. “(5) To issue telegraphic transfers on India in payment for sovereigns which the Secretary of State has purchased in transit from Australia or from Egypt to India.” The result of such drawings is that the councils are made to play an enormous part in the adjustment of the trade balance of India and the swelling of balances in the Home Treasury and the locking up of Indian funds in London. The second point to note in comparing the preceding tables is with regard to the price at which the Secretary of State makes his sales. Before the closure of the Mints the price of the council bills was beyond the control of the Secretary of State, who had therefore to accept the price offered by the highest bidder at the weekly sale of his bills. But it is objected that there is no reason why the Secretary of State should have continued the old practice of auctioning the rupee to the highest bidder when the closing of the Mints had given him the sole right of manufacturing it. Availing himself of his monopoly position, it is insisted, the Secretary of State should not have sold his bills below 1s. 4 1/ 8d. or 1s. 4 3/ 32d., which, under the ratio of 15 rupees to the sovereign, was for India the gold-import point. In practice the Secretary of State has willed away the benefit of his position, and has accepted tenders at rates below goldimport point, as may be seen from the minimum rates he has accepted for his bills. It is said that if the council bills were sold in amounts required strictly for the purposes of the Home Treasury, and sold at a price not below gold-import point, gold would tend to be imported into India and would thus become part of the Indian currency media. As it is, the combined effect of the operations of the