19. To estimate the demand that the reserves might have to meet merely in order to support the currency, the existing volume of currency is what we chiefly require to know. For this sets, or suggests, a limit to the maximum amount which can possibly be spared from the active circulation.

Attempts to estimate the rupee circulation of India have been the occasion of some very interesting calculations. For many years past (since 1875) an annual census of rupees has been taken by examining in each Government Treasury a bag containing 2000. This enabled Mr. F. C. Harrison, when he was Comptroller of Currency, to apply the Jevonian method very fully; and he was also able to corroborate his estimates by reference to the numbers of the older issues, 1835 and 1840 (e.g.), actually withdrawn from circulation on the occasions when the Mint recalled them. Mr. Harrison’s results were checked by the labours of a later Comptroller of Currency, Mr. Adie, who applied to the same material two alternative methods of much greater technical complexity than Mr. Harrison’s.[66]

Jevons’s method is based on the assumptions that the proportions of coins issued at different dates found in the given samples roughly correspond to their proportions in the circulation at large, and that the numbers in circulation of the latest issues do not much differ from the numbers issued from the Mint. In short, if we know the relative proportions of coins of 1860 and of 1912 in the circulation, and if we know, approximately, the absolute number of coins of 1912, we can calculate the absolute number still circulating of the coins of 1860. In applying this method to the Indian data, we are assuming that the proportions of rupees of each date found in the bags examined in a great number of scattered Government Treasuries are a fair sample of the proportions still in circulation throughout the country. In a country such as India, however, there may be great stagnancy in a part of the circulation, and the coins finding their way to the Government Treasuries may be a sample rather of the floating surplus of coinage, which has a relatively high velocity of circulation, than of the total stock, which includes semi–hoards passing from hand to hand comparatively seldom. Since these samples are likely, therefore, to contain an undue proportion of recent issues, estimates of the total circulation, which are based on them, may be expected to fall short of the truth rather than to exceed it. There is reason, also, for supposing that in some cases the officials charged with the duty of examining the samples did not always deal with them conscientiously. A tendency was noticed for the returns of one year to resemble those of the previous year more closely than they should, and not infrequently a batch of coins would be attributed to a year in which it is known that none were minted. Nevertheless the calculations of Mr. Harrison and Mr. Adie, and the data on which they are based, seem on the whole coherent, and bear, so far as one can judge, the marks of substantial accuracy.

A quite different method of estimating the circulation has been adopted by Mr. F. J. Atkinson.[67] His method is direct; and consists in a calculation or estimate of the additions to the currency and the losses from export, melting, etc., year by year, from 1831 when the modern coinage first began. Some of the items in the calculation are definitely known, but others, the amount annually melted, for example, are almost entirely a matter of guesswork. The fact that his calculations contain altogether a great number of separate guesses does not prevent his final result from being a guess too. For the period previous to the closing of the Mints some of his estimates for the amount melted seem very low, and this may possibly explain why his final results yield a much higher total for the circulation than those of Mr. Harrison and Mr. Adie. In recent times, i.e. since the closing of the Mints, and specially since the new equilibrium which was reached in 1900, Mr. Atkinson’s method is much more satisfactory than for earlier years and, since the doubtful items are in these later years a far smaller proportion of the whole, much less likely to lead us wrong. For the earlier years, therefore, I am inclined to prefer Mr. Harrison’s conclusions; but I think they can be brought up to date by a year–to–year method resembling Mr. Atkinson’s. The increase in Mr. Atkinson’s estimate during the ’nineties is due to the fact that, as his figures purport to exclude rupees in hoards, he must make large allowance for the coins from this source then entering into circulation.

The actual figures are as follows:—

Estimate of the Rupee Currency in Crores (10,000,000) Of Rupees

Harrison.Adie,
1st method.		Adie,
2nd method.		Atkinson.(a)
1881{about
115		108...135
1882111108133
1883113110136
1884106107136
1885104105139
1886106110145
1887 ...109108148
1888120106106152
1889...112112154
1890...121115159
1891...121116166
1892125129121167
1893128132130173
1894...129126176
1895...128127169
1896...121120172
1897...116116178
1898120118113183
1899...118112178
1900.........177
1901.........189

(a) Of Mr. Atkinson’s two separate calculations, made in 1897 and 1903, I have taken the latter. His calculation explicitly excludes rupees in hoards, currency reserves, and Government balances; and is not, therefore, entirely comparable with the others. If it were, the excess would be considerably greater than it actually appears above.

20. These are the data. It is very difficult to estimate the extent to which rupees may have emerged from hoards during the period which succeeded the closing of the Mints. Mr. Atkinson’s figures suggest that rupees from this source not only made good the natural wastage in the active circulation but actually brought about a large increase in it. Judging from the course of prices, I think he must have made an excessive allowance under this head. The figures of Mr. Harrison and Mr. Adie, on the other hand (which refer to the total circulation), point to a more moderate influx out of hoards into current use. I propose to take a middle course, nearer, however, to Mr. Harrison than to Mr. Atkinson, and to assume a public circulation in 1900 (i.e., excluding rupees in the Currency Reserve and Government Balances) of 120 crores of rupees. This estimate is probably near enough to the truth for our purpose. If it is incorrect, I think it is more likely to be an underestimate than an overestimate.