Vol. 6 · pages 656–660

641 MINUTES OF EVIDENCE international payment, is that the unit of internal currency should be stably related to a definite gold value ?—I do not quite accept that; it may be stable for international purposes ; it might not be stable for internal purposes. 6070. I do not think I managed to make my question quite clear. I understand what is desired by you in your recommendations is that the unit of currency which is used internally should be stably related to a gold value ?—I am really more for the use of gold. I am opposed to any kind of system which will economise gold under the present circumstances. Because I think that economy of gold is incompatible with security of price. My standpoint is very different from the standpoint of other people. I may be a little barbarous in my view. 6071. Not at all. Let us examine what your real idea is. What is your ideal to be attained in the organisation of the currency of a country ? It is not that the internal unit should be stable in relation to gold ?—Oh yes, it should be stable—not in relation to gold but stable in terms of commodities. 6072. By what methods do you recommend that India’s internal currency should be stabilised, that is, in relation to what, and, secondly, by what methods ?—It should be stabilised more in relation to commodities rather than to gold, which is used only for purposes of internal trade. And I say it should be done by stopping the coinage of rupees altogether, and prescribing the use of gold. 6073. If we reject gold as a standard of reference for the internal currency, what other standard of reference are we to adopt ?—That I have given here. That we should either go to the Compensating Standard of Professor Fisher or to the Tabular Standard of Professor Jevons. If you do not want to use gold and economise gold, then my submission is that you should go to one or other of those two. 6074. I am not sure that I am very intimately acquainted with Professor Fisher’s standard, but are these both the same sort of proposals ?—They are very much the same except that Professor Fisher’s Compensating Standard—they are really what I should say, I mean, the two sides of the same medal,

642 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES so to say. Professor Fisher would, for instance, alter the metal in the gold unit according to a certain index number, and Professor Jevons would allow more units to be given or less units to be given according to a certain index number. But I think those two are too complicated. I personally believe that a gold standard for all practical purposes is sufficient. 6075. Returning to what is practically possible, you are of opinion that the value of India’s currency unit should be determined in reference to a certain quantity of gold ?—No, my submission is that India should have gold in currency. Gold should not only act as a unit of reference. 6076. Let me pass from that and ask you another question. Let me now deal with the view which you advance, which I understand is best expressed in paragraph 4 of your memorandum, sub-paragraph (2), where you say : “The whole world is suffering from a continuous rise of prices owing to the depreciation of gold. Anything, therefore, that will tend to appreciate gold will be to the good ; and if gold is to appreciate there must be a larger use of gold as currency.” If I understand the precise force of that opinion, it is that the gold exchange standard tends to economise the use of gold, and that what is prudent and advisable is not that the use of gold should be economised and therefore that the gold exchange standard is bad?—Yes. 6077. And that is based upon the view which you take as to the future relation between the demand and the supply of gold in the world ?—Yes. 6078. You are of opinion that the future supply of gold is likely to grow in relation to the demand ?—No, not grow ; it will remain large because other people are not using gold, they are using paper, they are not in a position to use gold, so gold, even if it is not used, will remain large in quantity. 6079. First of all, a preliminary question in regard to that. Are you considering here the interests of India, or are you considering the service which India might render to the rest of the world ?—I have both in view. 6080. You think that, by doing that, India will be serving her

643 MINUTES OF EVIDENCE own interests and the interests of the rest of the world at the same time. Do you agree with the not uncommonly held opinion that a gold currency is an expensive system ?—Yes, it is. 6081. So that we have to consider, in the first place, the possible disadvantage to India of the expense involved. What are the advantages to India to set against that expense ?—It is that you get a more stable standard, which as Professor Cannan says is knave-proof and fool-proof. 6082. Now, as regards the prospect. The force of this contention would depend, would it not, upon the realisation of your anticipations as regards the supply of gold in the world at large ?—Yes. 6083. Would you agree that, supposing on the other hand there was to be a relative decrease in the world’s gold supply such as might tend to a general rise in world prices, that then it would be to the advantage of India, as of other countries, to economise in the use of gold ?—Well, my reply is that we need not be afraid of an indefinite contraction. We have always got methods for increasing currency. We must guard against indefinite expansion which is always possible. 6084. If you have pegged the Indian currency definitely to gold through the gold standard and there is a relative diminution in the world’s gold supplies, then any general fall in prices which must result would make itself felt in India also ?—Yes, but that could be guarded against by increasing our paper currency or otherwise by manipulating the paper currency. 6085. Is not that sacrifice very characteristic of the gold currency system, for which you yourself have selected that system ?—No, I am making gold the currency simply because I want to avoid the possibilities of indefinite expansion. As I say, you can always guard against an indefinite contraction. Falling prices can always be prevented. 6086. Now let me ask you a question as to the opinion you have formed that anything that would tend to appreciate gold would be to the good. Have you been able to arrive at any statistical estimates as to what the future of the relation between the supply and the demand of gold will be in the course of years

644 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES to come ?—Well, in my investigations I did some of them in 1923, when I was writing the book I had occasion to read some articles which appeared in the Harvard Business Barometer Series and I rather get the impression that there was no likelihood of any fall in the production of gold. And besides, my point is this, that the countries of the world are using so much paper that whatever gold supply we have is really very large. Those countries therefore that can avoid economising gold might as well do it to their own benefit and to the benefit of the rest of the world. 6087. I am not quite sure that I follow the latter part of your reply ?—What I say is that although the production of gold may not be increased physically from the mines, yet the use of substitutes for gold in modern days is on such a vast scale that the quantity of gold in the present circulation might appear to be large enough for a long period for the transactions of the world even without new additions from the mines. 6088. You have no more statistical calculations which you would care to put before the Commission as to your estimate of the future supply of gold ?—No, I have made no estimates. 6089. This is a matter, of course, which is of great importance for the consideration of the Commission, so let me put to you one or two estimates that I have been supplied with from other sources. These are estimates as to the effect upon general gold prices of the movement of the relation between the demand for gold and the supply of gold for a period of years. They are forecasts made at various dates by authorities, and they are referred to the year 1930. What is done is to measure the effect of the gold supply upon prices by trying to forecast the general level of prices in 1930 by reference to 1913 as the 100 standard, and thus to see what the future of the world in this regard is. I have here an estimate of Sir James Wilson, made in 1921, who estimates that the result of these factors will be that the general price level in 1930 will be stable at 115. That is a substantial fall, you see from the present figure which is round about 158. Then there is that estimate to which you have already referred, the Harvard Business Barometer, in 1922, which estimates that in 1930 the general price level should stand about

645 MINUTES OF EVIDENCE 150, and should be stable at that figure. Then there is Professor Gregory, who makes an estimate in the near past, May, 1925, who estimates that the general price level will stand about 162 in 1930 and should be rising at that figure. So he is the one who is most of your opinion. And, finally, there is Mr. Joseph Kitchen, an eminent authority, who in July, 1925, made a forecast that in 1930 the general price level should be expressed by a figure of 120 and should be falling at that figure. Of these four attempts to forecast the position, three anticipate that the prices will have fallen at that time ; two believe that they will be stable at that lower level; one, Mr. Kitchen, believes that they will be falling at that lower level, and only one believes that they will be higher than they are now and rising. I will put it in this way. In view of these very careful attempts to estimate the situation does it not teach us the necessity of exercising great caution in making the assumption that it is unnecessary, in order to maintain prices stable, to economise the use of gold ?—I am rather in favour of falling prices rather than rising prices, and I am glad if they do fall and fall rapidly too. I think it is good for the nation that there should be a fall in prices rather than a rise in prices. So these estimates do not really deter me from making my proposal. 6090. Nevertheless, there is some different basis for your opinion ?—I take those opinions for what they are worth. I am not in a position to contradict them because I have never made any estimates. But somehow this is my belief that already the existing amount of gold is so large and the capacity of the countries of the world to use that currency, any currency, is so small that the supply of gold is likely to remain larger for a long period, and there is, in my opinion, not much chance of prices falling. 6091. Then there is a further question. I should preface it by saying that you are dealing here with the abolition of the exchange standard ?—Yes. 6092. In paragraph 5 you say, “The gold standard reserve is peculiar in one respect, namely, this : the assets, i.e., the reserve and the liabilities, i.e., the rupees are dangerously