Vol. 6 · pages 596–600

581A RETURN TO THE GOLD STANDARD Secretary of State is said to be to lock up Indian gold in London. With the use or misuse of the Indian gold in London we are not here concerned. But those who are inclined to justify the India Office scandals in the management of Indian funds in London, and have offered their services to place them on a scientific footing, may be reminded that a practice on one side of Downing Street which Bagehot said could not be carried on on the other side of it without raising a storm of criticism, would require more ingenuity than has been displayed in their briefs. This much seems to have been admitted on both sides that the operations of the Secretary of State do prevent the importation of gold into India, not altogether, but to the extent covered by their magnitude. Now, those who have held that the ideal of the Fowler Committee has been defeated are no doubt right in their view that the narrowing of the Secretary of State’s operation would lead to the importation of gold into India. But what justification is there for assuming that the imported gold would become a part of the currency of India ? The assumption that the abolition of the Secretary of State’s financial dealings would automatically make gold the currency of India is simply a gratuitious assumption. Whether the imported gold would become current depends on quite a different circumstance. The other explanation offered to explain the failure of the ideal of the Fowler Committee is the want of a Mint in India open to the free coinage of gold. The opening of the Mints to the free coinage of gold has been regarded as the most vital recommendation of the Fowler Committee ; indeed, so much so that the frustration of its ideal has been attributed to the omission by the Government to carry it out. The consent given by the Government in 1900 to drop the proposal under the rather truculent attitude of the Treasury has ever since been resented by the advocates of a gold currency. A resolution was moved in 1911 by Sir V. Thackersay, in the Supreme Legislative Council, urging upon the Government the desirability of opening a gold Mint for the coinage of the sovereign if the Treasury consented, and if not for the coinage of some other gold coin. In deference to the united voice of the Council, the Government

582 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES TABLE LII BALANCE OF TRADE, COUNCIL DRAWINGS AND IMPORTS OF GOLD AFTER 1893 Years. Balance of Trade (Merchandise: Private Account). Net Imports of Treasure. Amount of Council Bills drawn. Excess (+) or Deficiency (—) 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. 1893-94 21,660,500 – .39 8.3 9,530,235 – 9,169,765 15,826,815 1,300,564 1 1.500 1894-95 25,765,000 – 2.7 3.4 16,905,102 – 94,898 15,707,367 1,503,124 1 0.000 1895-96 29,963,800 1.5 3.7 17,664,492 + 664,492 15,603,370 3,393,798 1 1.000 1896-97 21,333,100 1.4 3.5 15,526,547 – 973,453 15,795,836 2,832,354 1 1.781 1897-98 18,847,000 3.2 5.4 9,506,077 – 3,493,923 16,198,263 2,534,244 1 2.250 1898-99 29,560,700 4.3 2.6 18,692,377 + 2,692,377 16,303,197 3,145,768 1 3.094 1899-1900 25,509,600 6.3 2.4 19,067,022 + 2,067,022 16,392,846 3,330,943 1 3.875 1900-01 20,727,400 .5 6.3 13,300,277 - 3,139,723 17,200,957 4,091,926 1 3.875 1901-02 28,630,600 1.3 4.8 18,539,071 + 2,039,071 17,368,655 6,693,137 1 3.875 1902-03 33,352,600 5.8 4.6 18,499,946 + 1,999,946 18,361,821 5,767,787 1 3.875 1903-04 45,424,100 6.6 9.1 23,859,303 + 6,859,303 18,146,474 7,294,782 1 3.875 1904-05 40,548,200 6.5 8.9 24,425,558 + 7,925,558 19,463,757 10,262,581 1 3.969 1905-06 39,086,700 .3 10.5 32,166,973 + 14,333,973 18,617,465 8,436,519 1 3.938 1906-07 45,506,600 9.9 16.0 33,157,196 + 15,357,196 19,208,408 5,606,812 1 3.969 1907-08 31,640,000 11.6 13.0 16,232,062 – 1,867,938 18,487,267 5,738,489 1 3.906 1908-09 21,173,300 2.9 8.0 13,915,426 – 4,584,574 18,925,159 8,453,715 1 3.906 1909-10 47,213,000 14.5 6.3 27,096,586 + 10,896,586 19,122,916 15,809,618 1 3.906 1910-11 53,685,300 16.0 5.8 26,783,303 + 11,283,303 19,581,563 18,174,349 1 3.906 1911-12 59,512,900 25.1 3.6 27,058,550 + 9,900,250 19,957,657 19,463,723 1 3.937 1912-13 57,020,900 22.6 11.5 25,759,706 + 10,259,706 20,279,572 9,789,634 1 3.969 1913-14 43,753,900 15.6 8.7 31,200,827 + 10,000,827 20,311,673 3,157,732 1 3.937 1914-15 29,108,500 5.1 5.9 7,748,111 — 12,251,889 20,208,598 7,913,236 1 3.937 1915-16 44,026,600 – .7 3.2 20,354,517 + 13,354,517 20,109,094 12,803,348 1 3.937 1916-17 60,843,200 8.82 12.5 32,998,095 + 29,093,095 21,145,627 11,391,993 1 4.031 1917-18 61,420,000 16.8 12.7 34,880,682 + 34,880,682 26,065,057 16,625,416 1 4.156 1918-19 56,540,000 – 3.7 45.3 20,946,314 + 20,946,314 23,629,495 14,715,827 1 4.906

583A RETURN TO THE GOLD STANDARD of India again asked the Secretary of State to approach the Treasury for its sanction.* The Treasury on this occasion presented the Secretary of State† with two alternatives : (1) That a branch of the Royal Mint be established at Bombay solely for the purpose of coining gold into sovereigns, and exclusively under its control; or (2) that the control of the Mint at Bombay should be entirely transferred to it. Neither of the two alternatives was acceptable to the Government of India ; and the Secretary of State, as a concession to Indian sentiment, sanctioned the issue of a ten-rupee gold coin from the Indian Mint. The Government of India preferred this solution to that suggested by the Treasury, but desired that the matter be dealt with afresh by the Chamberlain Commission then sitting. That Commission did not recommend a gold Mint,‡ but saw no objection to its establishment provided the coin issued was a sovereign, and if the coinage of it was desired by Indian sentiment and if the Government did not mind the expense of coinage.§ This view of the Commission carried the proposition no further than where it was in 1900, until the war compelled the Government to open the Bombay Mint for the coinage of gold as a branch of the Royal Mint. But it was again closed in 1919. Its reopening was recommended by the Currency Committee of 1919,¶ and so enthusiastically was the project received that an Honourable Member of the Supreme Council took the unique step of tempting the Government into adopting that recommendation by an offer to increase the Budget Estimates under “Mint” to enable the Government to bear the cost of it. The Government, however, declined the offer with thanks so we have in India the singular spectacle of a country in which there was a Gold Mint even when Gold was not legal tender, as was the case between 1835-93, while there is no gold Mint, when gold is legal tender, as has been the case since 1893. Just what an open Mint can do in the matter of promoting the ideal of the Fowler Committee it is difficult to imagine; but the following extracts from the evidence of a witness (Mr. Webb), than whom there was no greater advocate of an open gold Mint before the Chamberlain Commission, help to indicate just what is expected from a gold Mint. *See Commons Paper 495, of 1913 ; p. 57. †Ibid, p. 64. ‡Report, sees. 69-71. § The Commission recommended that if a gold Mint was not established in India Government should renew the notification withdrawn in 1906 to receive refined gold on suitable terms.—Report, sec. 72. ¶ Report, par. 67.

584 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES “The principal advantage which you would expect to derive from a gold Mint is that you would increase the amount of gold coin in circulation ?—That would be one of the tendencies. “Is there any other advantage ?—The advantage is that the country would be fitted with what I regard as an essential part of its monetary mechanism. I regard it as an essential part of its currency mechanism that it should have a Mint at which money could be coined at the requisition of the public. “I want to get exactly at your reason why that is essential. Am I right in thinking that you consider it essential to a proper currency system that there should be a gold currency ?— Yes. “And essential to a gold currency that there should be a gold Mint?—Yes, on the spot in India itself…… It would do away, in a measure, with the management by the Secretary of State of the Foreign Exchanges, in that there would be always the Mint at which the public could convert their gold into legal-tender coins in the event of the Secretary of State taking any action of which the public did not approve. It is a safeguard, so to speak, an additional safeguard, that the people of India can on the spot obtain their own money on presentation of the metal.” Here, again, the assumption that a gold Mint is a guarantee that there will be a gold currency seems to be one as gratuitous as the former assumption that if gold were allowed to be freely imported it would on that account become part of the currency. On the other hand, there are cases where Mints were open, yet there was neither gold coinage nor gold currency. Instances may be cited from the history of the coinage at the Royal Mint in London. The magnitude of gold coinage during the bank suspension period, 1797-1821, or the late war, 1914-18, is instructive from this point of view. The Mint was open in both cases, but what was the total coinage of gold ?Throughout the suspension period the gold coined was negligible, and during the years 1807, 1812, and 1814-16 no gold was coined at all at the Royal Mint.* Again, during the late war the coinage of gold fell off from 1915, and from 1917 it ceased altogether.† * See G. R. Porter, Progress of the Nation (Ed. Hirst) p. 568. † See Report of the Deputy Master of the Royal Mint, 1921.

585A RETURN TO THE GOLD STANDARD These instances conclusively show that although a Mint is useful institution, yet there is no magic in a Mint to attract gold to it. The historical instances adduced above leave no doubt that the circulation of gold is governed by factors quite independent of the existence or non-existence of a Mint open to the free coinage thereof. Now, it is an established proposition of political economy that when two kinds of media are employed for currency purposes the bad one drives out the good one from circulation. Applying this principle to the situation in India, it should be evident that so long as there is an unlimited issue of rupees gold cannot circulate in India. This important principle has been so completely overlooked by those who have insisted on the introduction of a gold currency that they have not raised a finger against the unlimited issue of rupees. Mr. Webb, the fiercest opponent of the India Office malpractices, and the staunchest supporter of the view that if only the Secretary of State could be made to contract his drawings gold would flow and be a part of the currency in India, recommended to the Chamberlain Commission that— “The sales of Council Drafts should be strictly limited to the sum required to meet the Home Charges, and no allotments should in any circumstances be made below, say, 1s. 4 1/8d. to 1s. 4 3/32d.—i.e. about the present equivalent of specie point for gold imports into India. The sum required in London for Home Charges having been realized, no further sales of Council Drafts should be made except for the express purpose —duly notified to the public —of purchasing metal for the manufacture of further token coinage. Such special sales of Council Drafts should not be made at anything below specie point for gold imports.”† Again, Sir V. Thackersay, in the course of his speech on March 22, 1912, moving a resolution in the Legislative Council, asking the Government to open the Mint for the coinage of gold in India, observed :— “Let me make myself clear on one point. I do not suggest that Government should give up the right to coin rupees or refuse to give rupees when people demand the same. I do * See Report of thc Deputy Master of the Royal Mint, 1921. † Italics not in the original.