Indian Currency and Finance

by John Maynard Keynes

1899–1903. Negotiations for coinage of sovereigns in India (dropt indefinitely Feb. 6, 1903).

1900. Gold Standard Reserve instituted out of profits of coinage.

1904. Secretary of State’s notification of his willingness to sell Council Bills on India at 1s. 4⅛d. the rupee without limit.

1905. Act authorising the establishment of the Currency Chest of “earmarked” gold at the Bank of England as part of the Currency Reserve against notes,[2] and the investment of a stated part of the Currency Reserve in sterling securities.

1906. The Notification withdrawn which had directed the issue of rupees against the tender of gold (as distinguished from British gold coin).

1907. Rupee branch of the Gold Standard Reserve instituted.

1908. Sterling drafts sold in Calcutta on London at 1s. 3²⁹/₃₂d. the rupee, and cashed out of funds from the Gold Standard Reserve.

1910. Act rendering Currency notes of Rs. 10 and 50 universal legal tender,[3] and directing the issue of notes in exchange for British gold coins.

1913. Royal Commission on Indian Finance and Currency.

8. In § 6 I have stated the practical effect of these successive measures. But the legal position is so complicated and peculiar, that it will be worth while to state it quite precisely. Previous to 1893 the Government were bound by the Coinage Act of 1870 to issue rupees, weight for weight, in exchange for silver bullion. There was also in force a Notification of the Governor–General in Council, dating from 1868, by which sovereigns were received at Government Treasuries as the equivalent of ten rupees and four annas. This Notification, which had superseded a Notification of 1864 fixing the exchange at ten rupees, had long been inoperative (as the gold exchange value of ten rupees four annas had fallen much below a sovereign). The Act of 1893 was merely a repealing Act, necessary in order to do away with those provisions of the Act of 1870 which provided for the free mintage of silver into rupees. At the same time (1893) the Notification of 1868 was superseded by a new Notification fixing fifteen rupees as the rate at which sovereigns would be accepted at Government Treasuries; and a Notification was issued under the Paper Currency Act of 1882, directing the issue of currency notes in exchange for gold at the Rs. 15 to £1 ratio. The direct issue of rupees against the tender of gold also has been regulated by a series of Notifications, of which the first was published in 1893, up to 1906 rupees being issued against either gold coin or gold bullion; and since 1906 against sovereigns and half–sovereigns only. Apart from Notifications, an Act of 1899 declared British sovereigns legal tender at the Rs. 15 to £1 ratio, an indirect effect of which was to make it possible for Government, so far as Acts are concerned, to redeem notes in gold coin and refuse silver. And lastly, the Paper Currency Act of 1910 bound the Government to issue notes against the tender of British gold coin.