It has been estimated by the Paper Currency Department[40] that in 1907, as a result of the absorption of earlier years, not less than two millions were in circulation. But it is supposed that by the end of 1908 nearly the whole of that amount had disappeared. Owing to the depression of that year and the low level of the exchanges, the most profitable employment of the sovereigns was as bullion. This is strikingly borne out by the almost negligible receipts of gold (given below) by Post Offices and Railways in 1909–10. Until 1910 the absorption of sovereigns was not sufficient to restore them to a position of any importance as currency. We have chiefly to consider, therefore, the imports of sovereigns since 1910. It is from this source that the sovereigns now circulating as currency are likely to have come.
9. When we proceed to detail, it appears that there are several important parts of India in which the use of the sovereign is still negligible—in Bengal, Eastern Bengal, Assam, the Central Provinces, and Burma. In these provinces it has not begun to make any serious headway. In the United Provinces (for the purchase of wheat) and in certain districts of Madras, on the other hand, sovereigns seem to circulate to some extent, to be received freely by the general public, and to be increasing, though at no sensational rate. In Bombay and the Punjab, particularly in the latter, their use is, however, much more important. Most of the detailed evidence, which is available, refers to the Punjab; and care must be taken not to apply to the whole of India opinions from witnesses in that province as to the present position of gold. The following extract from a resolution passed by the Punjab Chamber of Commerce on June 4, 1912, is interesting. The Chamber “are able to state authoritatively that sovereigns are becoming popular and that their circulation is increasing. They are accepted as legal tender in the bazaars, and this may be attributed to the intelligence of the people and to the fact that all over the East (in China and the Straits Settlements), where the Punjab Sepoys serve in the army and the police, the sovereign is popular. These men remit their earnings in gold, and as there is hardly a village in the Punjab that has not sent a man to these services, it is not surprising that the value of the sovereign is understood It is difficult to say to what extent sovereigns are being hoarded, but that they are held up by the well–to–do to a very considerable amount is undoubtedly the case; and hoarding will continue among the rural population for years to come. With regard to the probable effect this importation of sovereigns may have on exchange, they are of opinion that Government should not rely on the sovereigns that are being absorbed by the districts in exchange for produce and in the shape of savings coming out at any time in any appreciable quantity to support the stability of the rupee.” In 1911–12 the Comptroller of Currency collected a number of district reports as to the growing popularity of gold in the Punjab. They completely corroborate the above summary.
10. Before we pass on to other aspects of the question, a word may be added with special reference to the very large gold imports of quite recent date (i.e., in 1912). Popular attention has been attracted by the figures for that year, which are indeed truly remarkable.[41] The gold imports of 1911–12 and 1912–13 (see table on p. 76) were noteworthy as compared with those of former years by reason of their huge aggregate amount; but they were even more noteworthy if regard be had to the very high proportion of sovereigns.
I do not believe, however, that a conclusion can fairly be drawn from these figures as to any startling change in the position of the sovereign in India has experienced two very good seasons and has been able, therefore, to accumulate savings unusually large extent for investment in gold ornaments and hoards. Is this altogether inadequate a partial explanation of the recorded figures? I do not, for the following reasons, think it is.
In the first place the gold imports for 1911–12 fall short of, and those for 1912–13 do not much exceed, those for 1910–11 if we exclude the additions to the Paper Currency Reserve. Imports of gold for this purpose are, for reasons to be explained in Chapter V., quite independent of the effective desire of India for gold, and occur merely because gold happens in some circumstances to be a cheaper means of remittance to India than Council Bills or any other method. In the second place the conditions of 1912 were somewhat abnormal on account of the unusually large supplies of gold which were available from Australia and Egypt, it is a matter of importing gold from England, those who want it for bullion purposes will generally find it cheaper to buy gold bars than to buy gold coin. But if there are sovereigns on their way from Australia and ready to be diverted to India, or if there are surplus sovereigns available for export at Alexandria, it may be a good deal cheaper to buy these sovereign than to get gold bars from London. The explanation of this, depending on the foreign exchanges, is fully discussed in Chapter V. I suspect, therefore, that a higher proportion than usual of the sovereigns imported in 1912 were put to non–currency uses for which gold bars would have served just as well. If sovereigns rather than bars are imported from London it is reasonable to draw the conclusion that the importer (since he must pay a higher price) definitely prefers them. But if sovereigns are imported from Egypt or Australia rather than bars from London, no such conclusion can be drawn. Of the £21,500,000 sovereigns imported into India in 1912 only about £5,000,000 came from London—the rest from Egypt and Australia.[42] From the gross figures of gold imports into India in 1912 even heavier deductions than usual must be made, therefore, before we have an indication of the extent to which additional sovereigns have really found their way into the currency.[43]
11. Perhaps we may fairly sum this evidence up by saying that it goes to show the existence in India at the present time of an enormous demand for gold bullion, a very considerable demand for sovereigns for purposes of hoarding, and a relatively smaller demand for them, chiefly confined to the United Provinces, the Punjab, Madras, and Bombay, for purposes of currency.
Those who think that this tendency to use gold coins should be further encouraged have advocated three methods of doing so: by making arrangements for the coinage of sovereigns at Bombay; by the mintage there of some distinctively Indian coin of the denomination of 10 rupees; by a deliberate attempt on the part of Government, as in 1900–1901, to force sovereigns into circulation and to familiarise parts of the country with them where they are at present unfamiliar, even to the extent of refusing to issue more rupees on demand.