CHAPTER I
THE PRESENT POSITION OF THE RUPEE
1. On the broad historical facts relating to Indian currency, I do not intend to spend time. It is sufficiently well known that until 1893 the currency of India was on the basis of silver freely minted, the gold value of the rupee fluctuating with the gold value of silver bullion. By the depreciation in the gold value of silver, extending over a long period of years, trade was inconvenienced, and Public Finance, by reason of the large payments which the Government must make in sterling, gravely disturbed; until in 1893, after the breakdown of negotiations for bimetallism, the Indian Mints were closed to the free mintage of silver, and the value of the rupee divorced from the value of the metal contained in it. By withholding new issues of currency, the Government had succeeded by 1899 in raising the gold value of the rupee to 1s. 4d., at which figure it has remained without sensible variation ever since.
2. There can be no doubt that at first the Government of India did not fully understand the nature of the new system; and that several minor mistakes were made at its inception. But few are now found who dispute on broad general grounds the wisdom of the change from a silver to a gold standard.
Time has muffled the outcries of the silver interests, and time has also dealt satisfactorily with what were originally the principal grounds of criticism, namely,—
(1) that the new system was unstable,
(2) that a depreciating currency is advantageous to a country’s foreign trade.
3. The second of these complaints was urged with great persistency in 1893. The depreciating rupee acted, it was said, as a bounty to exporters; and the introduction of a gold standard, so it was argued, would greatly injure the export trade in tea, corn, and manufactured cotton. It was plainly pointed out by theorists at the time (a) that the advantage to exporters was largely at the expense of other members of the community and could not profit the country as a whole, and (b) that it could only be temporary.