6. We know, of course, what the annual net addition to the total stock of gold in India (i.e., the imports and the production less the exports) approximately is—although the amount of the steady leakage across the land frontiers is usually neglected.[36] We know also how much of this addition is in the form of sovereigns, and how much in the form of gold bars. By making allowance, therefore, for the increase or decrease of sovereigns in the Paper Currency Reserve and the Government Treasuries, we can calculate how many sovereigns have found their way each year into the hands of the public. But as to the uses to which the public put the sovereigns our information is exceedingly vague and unprecise. By far the most careful and valuable discussions of the question are to be found in the Reports of the Comptroller–General of Paper Currency for 1910–11 (written by Mr. R. W. Gillan) and for 1911–12 (written by Mr. M. F. Gauntlett); and I have made free use of these in what follows. First, it will be useful to have before us the statistical information referred to above:—

(1)=(2)+(3)
Net Addition
to Stock of
Gold:—
Imports—
Exports +
Production.		(2)
Net Additio
to Gold
in Paper
Currency
Reserve and
Treasuries.(a)		(3)=(4)+(5)
Net Addition
to Stock of
Gold of
Public.		(4)
Net Addition
to Bullion
in Hands
of Public.		(5)
Net Addition
to Sovereigns
in Hands
of Public.
£££££
1901–023,223,000–5,0003,228,0002,261,000967,000
1902–037,882,0002,870,0005,012,0002,814,0002,198,000
1903–048,963,000944,0008,019,0004,741,0003,278,000
1904–058,841,00038,0008,803,0005,866,0002,937,000
1905–062,698,000–6,840,0009,538,0005,806,0003,732,000
1906–0712,061,000–193,00012,254,0007,098,0005,156,000
1907–0813,677,000–993,00014,670,0007,243,0007,427,000
1908–095,022,000–2,843,0007,865,0004,422,0003,443,000
1909–1016,620,0006,347,00010,273,0007,407,0002,866,000
1910–1118,153,00071,00018,082,0009,991,0008,091,000
1911–1227,345,0009,347,00017,998,0009,117,0008,881,000
1912–13(b)24,551,0004,231,00020,320,0009,320,00011,000,000

(a) Since 1908 the whole of this has been held in sovereigns.
(b) Estimate.

7. The enormous amount of wealth which the Indian people are now devoting to the barren accumulation of gold is brought out very strikingly by the figures in the third column. We know that it is hoarded, used as jewellery, as gilding, even (according to Messrs. Samuel Montagu) as medicine. But these figures are not relevant to our present purpose, and we must turn to the figures in the last column, giving the flow of sovereigns into the hands of the public. What part of this total is employed for ornament, what part for hoarding, what part is melted down, and what part is left truly to serve as currency?

In the first place it is estimated that about £1,000,000 “shield” sovereigns are now imported annually. These are sought after for purposes of ornament and stand at a premium.[37] It may be safely assumed, therefore, that they are not used as currency. Further, it is certain that a large number are melted every year and used as bullion. There are two causes of this. “As regards melting,” writes Mr. Gillan,[38] “it is to be noted that for certain purposes the sovereign has at all times an advantage. Gold being sold in 5–and 10–ounce bars, if a jeweller wants only a small quantity, a full–weight sovereign meets his purpose very well, as he knows its exact weight, fineness, and value, and has no trouble in obtaining it. And the sovereign is presumably cheaper than the same quantity of gold in out–of–the–way parts.” There is also another cause, connected with the exchanges;[39] at some times of year the cheapest way of getting gold is to buy sovereigns for rupees from the Government. This explanation is borne out by the fact that there is a steady demand for sovereigns from the Government’s reserves during the summer months. This is the time when the exchanges make it most advantageous to get gold in this way, and when there is least likely to be a demand for sovereigns as a medium of exchange. Many sovereigns, therefore, are melted. But we should be making rather a random guess if we were to attempt to say how many.

There must still remain, as the result of recent importations, a large number of sovereigns retained in the hands of the public in that form. But we cannot assume that even this reduced total is truly employed as a medium of exchange. There is a good deal of evidence for supposing that in some parts of the country sovereigns are displacing rupees for the purpose of hoards. This may be the case even when in the first instance the gold is used for currency. The crops may be sold for gold, because the cultivator wants gold for his hoard. “It is quite conceivable,” Mr. Gillan points out, “that the acceptance by the cultivator of gold in payment of his crops is in the nature of barter; that is to say, he takes the gold not as coin merely but for some other purpose, and the return of gold in payment of revenue may be no more than the return of so much as he finds himself unable to retain.”

8. It is clear, then, that we must not fly from a glance at column (1) of the table on p. 76, or even from a glance at column (5), to extravagant conclusions as to the present position of the sovereign in the Indian currency system. Many heavy deductions must be made from the first totals. What direct evidence is there as to the use of gold as currency?

“The best indication” (to quote Mr. Gillan again) “of the extent to which sovereigns have established themselves as a regular part of the currency, is to be found in the figures of receipts at Post Offices and Railways.” These have been as follows:—

Post Offices.Railways.
1906–07£553,000(a)£468,000(a)
1907–081,358,000 1,045,000
1908–091,001,000710,000
1909–10265,000134,000
1910–11638,000597,000
1911–121,363,0001,222,000

(a) Second half–year only.