382 



INDIA. 



rise. The committee concurred in the decision 

 of the Government of India not to revert to the 

 silver standard. The policy of declaring in favor 

 of the reopening of the mints to silver when cir- 

 cumstances indicate it as advisable, continuing 

 meanwhile theexisting arrangements, would rest 

 on the hope of a rise in the gold price of silver 

 or a fall in the rate of sterling exchange; but its 

 adoption could only be justified by a belief that 

 it would be advisable to return to silver mono- 

 metallism. As to the possibility of an interna- 

 tional agreement on a ratio, the governments con- 

 cerned had made no fresh proposals since the 

 negotiations of the United States and France 

 with Great Britain in 1897 proved fruitless. The 

 numerous persons in India who desired a lower 

 rate of exchange than Is. 4cZ., and would fix the 

 rupee at Is. 3d. or Is. 2d., base their opinion on 

 a belief that such lower rate would stimulate 

 production and the export trade. Any stimulus 

 derived from a falling rate of exchange would, 

 however, prove but transitory, and could only 

 continue until circumstances brought about the 

 inevitable adjustment. A steady exchange is in- 

 deed more favorable to the export trade than a 

 rapidly falling exchange. The committee found 

 no statistical support for the theory that exports 

 are largely and permanently stimulated by a de- 

 preciation in the standard of value, resulting in 

 a fall in exchange. Robert Campbell and Sir 

 John Muir dissented from the other members of 

 the committee in so far as they believed that the 

 experience of six years had not sufficiently justi- 

 fied the adoption of the Is. 4d. rate of exchange, 

 which represents the ratio of 22 to 1. The only 

 practical alternative at the present time to silver 

 monometallism the committee found to be the 

 gold standard that is, gold as the measure of 

 value in India, either with a gold currency or a 

 gold reserve. Over 80 per cent, of the foreign 

 trade of India is with countries having the gold 

 standard. A further important consideration for 

 a country like India is that a gold standard is 

 the simplest and most efficacious means of at- 

 tracting foreign capital. India needs capital from 

 abroad for the purpose of developing her pro- 

 ductive resources, and she needs also a periodic 

 inflow of money every year for the purpose of 

 moving the crops, the want of which is seen 

 from the fluctuations of discount rates at differ- 

 ent seasons, the variations reaching 7 per cent, 

 or more every year. A gold standard is the only 

 means, in the opinion of the committee, by which 

 these benefits can be obtained in present condi- 

 tions, but its effective establishment would not 

 preclude India hereafter from considering respon- 

 sible proposals for an international agreement. 

 The undertaking of the Government to give ru- 

 pees for gold at the rate of IQd. had practically 

 the result of making gold a legal tender, and of 

 fixing a stable rate of exchange and attracting 

 a stock of gold amounting already to over 2,- 

 000,000, which was held as a reserve against the 

 paper currency. A growth of confidence result- 

 ing from the definite adoption of the gold stand- 

 ard would tend to produce greater results in the 

 future. Unless the Government was empowered 

 to pay out gold in cashing its notes or meeting 

 other liabilities, it could not go on receiving it 

 into the paper-currency reserve or the treasury. 

 It seemed urgent to the committee that steps 

 should be taken to avoid all possibility of doubt 

 as to the determination not to revert to a silver 

 standard, but to proceed with measures for the 

 effective establishment of a gold standard. The 

 proposals of the Indian Government did not com- 

 mend themselves to the committee. The danger 



of the withdrawal of gold by the natives for 

 hoarding did not appear to the committee to 

 present such practical difficulties as to justify a 

 permanent refusal to allow India to possess the 

 normal accompaniment of a gold standard 

 namely, a gold currency. The committee was in 

 favor of making the British sovereign a legal 

 tender and current coin in India and of throw- 

 ing open at the same time the mints of India to 

 the unrestricted coinage of gold on the same 

 terms and conditions as those governing the Aus- 

 tralian branches of the royal mint. The result 

 would be that the sovereign would be coined and 

 would circulate both in Great Britain and India, 

 and there would be an effective gold standard 

 and a free inflow and outflow of gold. The com- 

 mittee did not recommend these measures for im- 

 mediate adoption, and considered that for some 

 time to come it would not be advisable to limit 

 tKe legal tender of rupees in discharge of debt. 

 The gold reserve should be freely used for remit- 

 tances when exchange falls below specie par, as 

 this is its principal use; and the Government 

 of India should make its gold available for this 

 purpose whenever the necessity arises, under such 

 conditions as circumstances may render desirable. 

 If exchange shows a tendency to fall below the 

 specie point, the Government might remit gold 

 to England, the India bills of the Secretary of 

 State being correspondingly reduced; and when 

 it has accumulated a sufficient reserve it might 

 discharge obligations in India in gold. The ex- 

 clusive right to coin rupees must remain vested 

 in the Government of India, which should con- 

 tinue to give rupees for gold, but should not coin 

 fresh rupees until the proportion of gold in the 

 currency is found to exceed the requirements of 

 the public. The committee recommended also 

 that the profit on the coinage of rupees should 

 not be credited to the revenue or held as an 

 ordinary balance, but should be kept in gold as 

 a special reserve apart from the paper- currency 

 reserve. The committee recommended the reten- 

 tion of the 16d. rate instead of a lower one or a 

 higher one, not because it is indicated on any 

 theoretical grounds, but because the business 

 world has accepted this provisional rate as the 

 permanent rate at which the Indian monetary 

 standard is to be transferred from a silver to a 

 gold basis, and because prices have adjusted them- 

 selves to that ratio and it is the one on which 

 debts have been contracted. For the speedy at- 

 tainment of an effective gold standard it is con- 

 sidered desirable that the Government of India 

 shall husband its resources, exercise strict econ- 

 omy, and restrict the growth of its gold obliga- 

 tions. E. A. Hambro thought that the estab- 

 lishment of a Government bank would facilitate 

 the carrying out of the policy recommended. W. 

 H. Holland advised making no change until the 

 provisional arrangement had been tested further. 

 Robert Campbell and Sir John Muir joined him 

 in appending to the report a warning against 

 borrowing in sterling either for the establish- 

 ment or the maintenance of a gold standard, and 

 incurring a load of debt and its consequent addi- 

 tion to the home charges, only to find, perhaps, 

 that an impracticable scheme had been pursued 

 which, when left to its own merits, must break 

 down. 



The Government adopted most of the recom- 

 mendations of the committee. The bill introduced 

 in the Legislative Council on Sept. 8 made the 

 sovereign legal tender in India, and provided for 

 the striking of gold coins in the Indian mints, 

 which were proclaimed a branch of the royal 

 mint of Great Britain. The rupee was fixed' at 



