March i, 1898.] THE TROPICAL AGRICULTURIST. 61 1 
Currency, Dear Money, Finance 
and Trade in India. 
A LEADING CALCUTTA MERCHANT 
SPEAKS OUT TO SOME PURPOSE 
“INDIA’S GREAT CURRENCY PROBLEM CAN BE 
SOLVED BY OUR FIELDS AND BY HER 
LOOMS AND BY THEM ALONE.” 
After referring to the Bank Accounts, (at the 
annual meeting of the Calcutta Bank Limited 
Jan. 28th) Mr. David Yule as Chairman said: — 
As you will remember, money was very stringent 
during the first half of the year, but as soon as July 
was reached, a much easier feeling was experienced, 
and employment for funds at profitable rates became, 
weekly, more difficult to find. Although a glance at 
the record of the official Bank rate does not indicate 
that money was too plentiful, it is nevertheless a fact 
that accommodation was available on short notice at 3 
per cent below the official minimum. While strongly 
of opinion ourselves that the drop in the open market 
was not warranted by the real state of the currency, 
the persistent way in which money was, so to speak, 
thrown at their heads, induced many people to believe 
that the burden of tight money had been removed, and 
that they might enter into fresh transactions without 
fear of this disturbing influence in future. The mis- 
take of trusting too much to the temporary depression 
cannot but be the cause of serious inconvenience now, 
and until this recent lesson be forgotten, borrowers will 
be inclined to accept the official Bank rate as a guide to 
their financial operations in preference to the illusive- 
ness of Burra Bazaar. It is, however, interesting to 
know that the reason of the divergence between the 
t wo rates was, in great measure, due to native capital, 
previously employed in the financing of piece-goods 
and produce, seeking re-investment in new channels. 
This brought native capitalists more openly than has 
been customary into competition ,vith the Presidency 
and other Banks. Piece-goods and produce dealers 
have not done well some months past, and inany of 
them have lost the margin of security which alone 
commended them as borrowers. There is, I regret to 
say, no hopeful feature in their trade, which dealers 
can point to as an inducement to their bankers to 
renew adv: i.ces. The piece f goods market has been 
upset by the vagaries of exchange, and stocks have 
accumulated owing to the failure of the retail demand, 
through poor crops and the general impoverished 
condition of the masses. As regards produce, the 
influences of anticipated large crops and glutted con- 
suming markets have justified great caution being 
exercised in making advances. 
SPECULATION ENCOURAGED. 
The result of the unwillingness of bazaar capitalists 
to provide, as had been their custom, for these branches 
of trade, was to create a strong speculative movement 
in the Shares of Joint Stock Companies and in Govern- 
ment Securities. Prices of some of the former 
advanced 40 per cent, and stocks, which previously 
were unsaleable, became freely inquired for, while 
the market absorbed readily the new Government 
per cent loan of 300 lakhs at the comparatively high 
rate of 98J per cent, besides relieving holders of 
Indian Government Paper in Europe to the extent 
of about 425 lakhs. So far as can be seen at present, 
the money put into circulation in these directions is 
likely to remain looked up for some months, and, 
although the men who are providing the funds to carry 
over the heavy indebtedness, from month to month, 
are well able to look after their own interests, and 
invariably do so, borrowers are feeling acutely the 
change that has so suddenly come over the market. 
What their position is may be inferred from the fact 
that Banks have been unable to advance against 
Government Paper, with full margin, at 13 per cent. 
It is not surprising that there has been a sharp fall 
in the value of all securities, and the tendency appears 
to be still dt wnwards. A source of weakness is that 
75 
so much of the burden is carried by native capitalists, 
who are not accustomed to the transitory periods of 
depression which overtake the stock market. 
RUPEES ARE NOT REMITTED. 
There seems to be an impression, shared in by the 
Finance Minister, that the stringency of the money 
market is due, in great measure, to the withdrawal of 
European capital which had been employed for 
banking purposes in India. This transfer of capital 
indicates the existence of a want of confidence either 
in the prosperity or security of the country or in the 
ability of the present currency policy to maintain a 
favourable rate of exchange, but the transfer does not 
affect the number of rupees in currency, as it does not 
take the shape of a shipment of rupees. If A remits 
£100 to London, he pays over his rupees to B who 
wishes to transfer a similar amount in sterling to India. 
Such a transaction can have no power to increase the 
stringency of the Indian money market, unless the 
rupees A parted with are withdrawn from useful circu- 
lation by B. There is no evidence that the market has 
been deprived of the use of such rupees. On the other- 
hand, it must be admitted that, had rupee.s not been 
released from hoards, since the closing of the mints, 
trade would have suffered even more severely than it 
has done for want of coin. The causes of the strin- 
gency must be looked for in the many directions in 
which it is possible for rupees to disappear from circu- 
lation. Besides these we have to take into account 
such factors in this question as the growth of popula- 
tion, the extension of industries and of railway com- 
munication, all of which tend, by opening out the 
country, to disperse rupees more widely from the 
centres of circulation. As you are aware, the life- 
blood of the currency policy of 1893 depends wholly 
on the scarcity of rupees, and so surely as December 
comes round once a year, will the period of dear 
money return. If money this year gets cheaper- 
before the end of June, the fact may safely be taken 
as a sign of a falling-off in the trade activity of the 
country. 
FANCIFUL vs. ACTUAL CALCULATIONS. 
At the meeting of the Legislative Council on 14th 
instant the mercantile member produced a statement 
to show the amount of money that would have been 
saved by Government if the rupee had been maintained 
at Is 4d during the financial years of 1894-95, 1895-96, 
and 1896-97. The inference is that the saving not hav- 
ing been made. Government had lost, or- become 
poorer, by the sum of Rl,192 lakhs, or (at exchange 
Is 4d) £7,945,733. This calculation I regard as an 
altogether- fanciful one, for there are many items which 
would have tended to reduce the saving, if not wholly 
to dissipate it, had Government been powerful enough, 
I will not say they did not try, to screw exchange up to 
Is 4d, in spite of the conditions of trade which operated 
to make the actual rates what they were. While on the 
subject of this calculation, another one more interest- 
ing .suggests itself to me, and that is the loss that 
holders of Government Rupee Paper- have suffered, 
during the past six monts, through the cun encv policy, 
or the pecuniary difficulties of Government. It would 
be well to compare it with the calculation before re- 
ferred to— Government’s loss in 3 years, 1,192 lakhs, 
equal to £7,944,733 ; holders of Rupee Paper loss in six 
months, 646 lakhs, equal to £4,310.833 ! I do not claim 
that there is any connection between the two calcula- 
tions. I merely wish to point out that there are some 
losses about which we hear very little but which are 
even more important than that of the Government’s 
loss by exchange. The difference between the two 
calculations is that one is fanciful, while the other is 
actual, as any one who held Government 31 per cent 
Paper on 1st July last, and wishes to dispose of it now, 
can have practical demonstration of. Poor India has 
many evils to contend against, and very few of them 
are enquired into and redressed. It is a very curious 
thing, however, that the Government’s loss by ex- 
change is constantly the subject of complaint and 
commiseration. Polios of the annual budget are 
devoted to the subject. The Empire appears to b 
wholly in the pow-er of this distressing item, althoug 
