Since the preceding chapters were written a great and most momentous step has been taken by the Indian Government. On the 26th of June, 1893, the Finance Minister in India announced that a gold standard was to be established, and that the mints were to be closed to the free coinage of silver. This measure, which so profoundly affects the prospects of the producers and manufacturers of India, I am compelled to notice. To do so, however, in an exhaustive manner would be quite beyond the scope of this book, and I shall confine my remarks as much as possible to the points of the subject which bear upon the welfare of those who produce or manufacture anything in India. The reports[[61]] and papers enumerated at the foot of the page supply me with a large amount of information and opinion, but I must warn those interested in the subject that a complete view of the whole situation, as far as India is concerned, cannot be obtained from them. For some, and in my opinion the most important, points connected with the question, have either not been alluded to at all, or quite inadequately investigated. These defects I hope in some degree to be able to supply from my long experience of the effects of the expenditure of capital in developing the resources of India—and I say in some degree, because I feel sure that a much fuller investigation is required before all the far-reaching effects of this momentous measure can be adequately weighed. I trust, however, that, even in the short space I am devoting to the subject, I shall be able sufficiently to elucidate those points which dominate the situation, and a consideration of which will show that if the Government succeeds in forcing up the gold value of the rupee in the manner proposed, the prosperity of the people, the popularity of our rule, and the state of our trade in the East will be most seriously prejudiced. And now let me begin at the beginning, so that the uninformed reader may have a clear view of the whole subject as far as India is concerned.
The origin of the movement in India with reference to the introduction of a gold standard and forcing up the gold value of the rupee is shortly, and I believe very accurately, stated by Sir Frank Forbes Adam in his evidence given before the Currency Committee; and on November 26th, 1892, he told the Committee that "Though there is undoubtedly dissatisfaction existing among a certain number of those carrying on foreign trade, really the origin of the movement and its true force proceed from the servants of Government." Of this, I think, there can be no doubt whatever; and it is important to remember that this movement did not originate with the people, or planters, or merchants, or manufacturers, or from any section of the producers and traders of India. The servants of the Government had a great and legitimate grievance, because they found that, though rupee prices in India were not to be complained of, they experienced a grievous loss on their home remittances, and it was their persistent agitation which created and maintained the true force of the movement. The agitation they thus originated was joined in by some of the merchants of India, though to what extent does not appear, and I can only say generally that the merchants who did join the movement were small in number. Bombay and Karachi were clearly against any interference with the currency; and from the expression of disappointment which fell from the Hon. Mr. Mackay—President of the Currency Association, Calcutta—with reference to the small number of his supporters, I am led to the conclusion that, with the exception of a certain proportion of Calcutta merchants, occasional individuals in other parts of India, and the servants of the State, all India was, and is, dead against the monetary policy of the Government. Of the twenty-two witnesses examined before the Currency Committee, thirteen were against the Government measure, six in favour of it (four of the latter being Government servants), two doubtful, and one presumably against the measure.
The main features of the measure I take from the statement of the Finance Minister, who, on the 26th of June, 1893, announced the introduction of a Bill "with the object of altering the Indian monetary standard from silver to gold," and who in his next sentence declared that "It is not intended to do more at present than stop the free coinage of silver at the Indian mints, and as a provisional arrangement to provide for the issue of rupees at these mints in exchange for gold at the ratio of 1s. 4d. per rupee."[[62]] In a subsequent part of his speech Sir David Barbour states "that an arrangement for the receipt of gold at the mints at a ratio of 1s. 4d. per rupee will be made by executive order, and so will the arrangements for the receipt of sovereigns in payment of sums due to Government at the rate of fifteen rupees a sovereign." The current rate of exchange then, and still existing, is about 1s. 3d., and the Government thus proposed, by creating an artificial scarcity of rupees, to force up the gold value of the rupee by one rupee per sovereign. Let us now glance at the cash effects of the measure on the finances of the Government and the prosperity of the people; and in doing so I shall, to aid the comprehension of the English reader who knows nothing of lakhs, or crores, or Rs. ×, state the figure in pounds sterling, treating the rupee at its old value of 2s. To do this will not materially affect my statements, for, though some articles have risen in price, others have fallen, and, on the average, the rupee (excepting as regards labourers' wages, which have much risen in many parts of India in recent years) goes nearly as far in India as it ever did, a fact which is fully corroborated by several very competent witnesses examined by the Currency Committee, though one witness maintained that silver prices in India had risen.[[63]] It may be interesting to note in this connection that the purchasing price of silver in China has remained unchanged for many years past, and that for the last thirty years there has been little change in the purchasing power of the rupee in Ceylon. Both these statements I make on the authority of witnesses examined before the Currency Committee.
What then would be the cash effect (1) on the finances, and (2) on the people, were the Government successful in forcing up the gold value of the rupee by one rupee a sovereign? The saving that the Government would effect in remitting money to England to pay home charges would amount to about £1,570,000,[[64]] but as the amount is liable to loss by exchange we must make a deduction, and, in round numbers, the sum that the Government would save is about a million and a half sterling. Now as to the people of India. What the Government gains, i.e., a rupee a sovereign, the seller of produce must lose, as exporters could afford to give them just so much less than they now do. Now, taking the exports of India at one hundred millions,[[65]] the currency measure of the Government would cause a loss to producers of 7 per cent., which is equivalent to a tax on the exported productions of India of seven millions. The result of course is, that to get little more than one million and a half into the Treasury, the Government proposes to take seven millions out of the pockets of the people. Now I have no wish to pose as what is commonly called an expert, and I naturally shrink from any idea of criticising that long chain of financial luminaries which, beginning at the Council Chamber at Calcutta, stretches through the rooms of the Currency Committee which recently sat in London, right up to that Cabinet over which the greatest of financial luminaries presides, but I trust I may be allowed to go as far as to say that the arrangement made by Mr. Gladstone's Government which is the body ultimately responsible—does not seem to be of a very alluring character, as it entails on India, viewed as a whole, a loss of £5,500,000. And this cheering result has apparently been viewed with such satisfaction by the financial experts, that it is to be regarded as merely a small instalment of the blessings they have in store for the happy toilers whose destinies they have been empowered to influence. For if the policy of taking five and a half millions sterling out of the pockets of the people in order to put about one million and a half into the financial till is a good one, the extension of the process, up to certain limits, must be equally so. For such an extension the Indian Finance Minister is evidently prepared, as one may see by looking again at the sentence I have quoted from the speech, in which he declares that "it is not intended to do more at present (the italics are mine) than aim at a rate of 1s. 4d." This, coupled with statements subsequently made, and by what the Currency Committee has suggested as to a farther increase if it should seem necessary, shows that the Government evidently contemplates a rise to 1s. 6d.; and indeed this must obviously be the case, as the anticipated gain from a rise to 1s. 4d., when put against the probable loss on opium, and the allowances to be made to Government servants to compensate them for the loss they sustain on home remittances, would go far to swallow up the gain to the State from a 1s. 4d. rate. Supposing, then, that the Government should be able to carry out its project of a 1s. 6d. rate, the blessings previously showered on the producers will be trebled; so, of course, will be the gain to the Exchequer; and the account will then in round figures stand thus:—gain to the Exchequer on home remittances, £4,500,000; loss to the producers, £21,000,000; or, in other words, the levy of an export tax of 21 per cent. on all the productions of India,[[66]] and a total annual loss to India considered as a whole of £16,500,000 sterling. This seems pretty well for a beginning, but it is really a very small part of the results that may with certainty be anticipated from the measure, which, as Sir David Barbour says, will have far-reaching effects. Of this, as we shall see, there can be no doubt whatever. Of the direct loss we can form a rough calculation; the indirect losses are indeed incalculable. But let me proceed.
We have seen that, at the least, the Government proposes to impose, and will impose if it can force up the exchange, an export tax (or what is practically an export tax) of 7 per cent., which is to be ultimately raised to 21 per cent. And we have now to follow out the effects of this on the producers, the people generally, and the financial prospects of the State.
The producers in India of articles for foreign export either, as the planters generally do, send their produce for sale to London, or, as the main body of producers do, sell them to merchants who export the goods. Both these classes of producers are of course much benefited by a low rate of exchange—the former when they sell in gold and remit money to India to pay for the up-keep of their estates, and the latter when they find that the merchant can afford to pay more rupees than they could when exchange was higher. If then, to put the case in a more precise way, the Government succeeds in forcing up the gold value of the rupee, and the merchant is thereby compelled to turn his sovereign into 15 rupees instead of 16 rupees, it is obvious that to make the same profit as before he must give the seller of produce one rupee less. Now let me take the business with which, as a planter, I am most familiar. I have roughly estimated the total value of the coffee annually produced in Mysore at £870,000, and if, for the sake of even numbers, we knock off £70,000, a 7 per cent. export duty on this will amount to £56,000, and if the Government could raise, as it proposes, the rupee to 1s. 6d., £168,000 a year would be the price that the measure would entail on a portion of the inhabitants of the native state of Mysore on this single article of export. But this direct cash loss is far from being all; and if the reader will turn back to the Introductory Chapter, and to that on Coffee Planting in Coorg, he will there find an explanation of the extraordinary effect produced by the introduction of capital into the rural districts of India, and of the remarkable effects it produces on the prosperity of the people, the development of the agricultural resources of the country, and the finances of the Government. But, for the convenience of the reader, I may briefly repeat here what I have pointed out in greater detail in the chapters alluded to.
From the estimate given of the profits of well-managed European plantations which have been formed on the best land (vide chapters on Coffee Planting in Coorg, and in Mysore), it is evident that, though these would be greatly injured by the exchange being forced up, they could still make fair profits; and, indeed, it is conceivable that, from the losses that the Government measure would entail, they might ultimately be in as good a position as they are now; for there are large amounts of poor lands which, if the Government policy is pursued, would be thrown out of cultivation, either partially or entirely, and the diminished production and demand for labour would, of course, be of great advantage to the estates which survived. And what would largely accelerate the decrease of cultivation would be the fact that if the exchange is forced up all confidence in the Government will naturally be shaken. For how can producers have any confidence in a Government which, instead of levying on the country as a whole the increased taxes it requires, seeks to attain its financial ends by manipulating the currency in such a way as to reduce to the producers the prices of the commodities they grow for export? And if the gold value of silver is to be forced up to 1s. 4d., and with the declared possibility of its being forced up to 1s. 6d., what is more likely than that the Government may persevere with this disastrous policy whenever it again finds itself in financial straits? And is it not evident that the present financial policy of the Government, and the possibility of its being further pursued, must give that shock to confidence which will at once repel capital and injure credit? And is it not equally evident that if the gold value of the rupee can be forced up in the manner proposed, the first effect of this will be shown in a large decline in the demand for labour? Now, as pointed out in the chapters previously alluded to, the results of an increased employment of labour are quite different from what they would be in England, where an increase of employment given to labourers merely means an increase of comfort amongst the working classes, and of the profits of the shopkeepers with whom they deal. For in India, the introduction of capital to be spent in labour in the rural districts means a social revolution, as large numbers of the labourers set up as cultivators the moment they have saved enough capital to do so. In some cases they give up working for Europeans, in others they combine agriculture with occasional months of work on the plantations, or other sources of employment; the whole lower classes of the people are thus elevated, and this tells at once on the finances, enabling (1) rents to be more easily paid, and (2) because the finances improve as more land is brought under cultivation. Now, not only would a large diminution of employment take place in connection with coffee-planting were exchange forced up, but the same cause would act on the growers of pepper, cardamoms, and other products, and the prosperity of the province would be thrown back, and the same kind of result would obviously occur in any part of India which grows articles for export.
But there is yet another result from this truly far-reaching measure, as Sir David Barbour justly calls it, which to my mind is the most important of all—the bearing of it on famines; for we all know that the population is rapidly increasing, and that of all apprehensions which haunt the minds of those responsible for the safety of India, those as regard famines are by far the greatest. And here I must ask the reader to turn back to my Introductory Chapter, and consider the facts relating to famines—facts which show how constantly the fear of famine lies before the Indian administrator, both from a financial and humane point of view. I ask him carefully to survey these facts, and then consider what effect the forcing up of the gold value of the rupee is likely to have on famine-producing causes. And is it not evident that the effect of the measure in diminishing the demand for labour must be enormous; that if less money is spent on labour, less will be spent in improving and developing the agricultural resources of India, in digging wells and other famine-preventing works; and that if the labourers fail to find the amount of employment they can now readily obtain, the greater will be the financial burden thrown on the hands of the State in times of famine and scarcity? And must it not be equally evident to anyone possessed of the humblest form of human reason that the Government had far better exhaust every taxational resource before embarking on a course which, if the anticipations of Government are realized as to silver, will be ruinous to the country, and which, at a vast direct and indirect cost to the people, will only, as I have shown, afford a comparatively speaking trifling financial relief to the State? But it is time now to pass to other points connected with the measure. And first of all let us glance at the evident political results that must arise from it.
From what has been previously said, it is evident that the Government has arrayed against itself every class in India excepting its own civilian and military servants, and to these we have only to add, not another class, but only a small proportion of the mercantile class. With the exception of some just complaints they had to make as regards charges[[67]] that had been unjustly thrust on the Indian Exchequer, and which I myself made in the "Times" and elsewhere long before the Congress was even thought of, the agitators of the Congress had no serious grounds to go upon. But who can say that now? Up till lately there was no cause for discontent. India has never been more prosperous, and has never shown greater, or nearly as great signs of progress, as she has within the last twenty years. Not only has the demand for labour been abundant, but in many instances it has exceeded the supply. The rates of wages had largely increased, and were producing, as I have previously shown, an accelerated quickening of attention to the development of the resources of the soil. All that the country wanted was to be let alone, and if the financial conditions required increased taxation, no agitator could have successfully complained of this, seeing that it could only have been imposed on account of that cheapening of silver which has been one of the great causes (railways were the other) of the increased prosperity which all classes have enjoyed in recent years. But, if the Government measure raises the gold value of the rupee, the agitator will be able to point out that, at an enormous cost to the producers of India, the Government has only obtained a most trifling financial relief, and be able to complain with justice that the Government has lessened the profits of the agriculturist and diminished the employment for labour. What an admirable advantage has the monetary measure of the Government conferred on the popularity of British Rule in India!
I have alluded to the losses that the measure must inflict on the planters of Southern India, and my remarks on that head apply equally to the tea-planters of India; but the latter have, besides, a special grievance which they share in common with the tea-planters of Ceylon, and this grievance is also shared in by the coffee-planters, though, as far as I can see, hardly to the same extent. This well-founded grievance lies in the fact that if no international agreement (and there seems no probability whatever of such an agreement ever being come to within any time to be even guessed at) is come to between the silver-using countries in the East, the tea-planters of India and Ceylon will be brought into unequal competition with their rivals in China, and the coffee-planters of India and Ceylon will in like manner be unfairly weighted in their competition with the coffee producers of Brazil. With reference to the tea-planters of India and Ceylon the case is very clear, and it is perfectly obvious that if in India you have silver artificially raised in value relatively to gold, and that in China silver remains unprotected, the Chinese will be able to accept a smaller gold value for their tea than the Indian producers, and the difference in the exchange may be such that China may regain her former position in the tea market, and that Indian teas may be partially driven from the field; and if we add to that that the Indian tea-planter will, in consequence of exchange being forced up, have fewer rupees to pay his coolies than he has now, it is evident that the result of the Government measure will be most serious to this industry. The evidence (Currency Committee) that relates to Ceylon is very decisive on this point, and the witnesses examined with reference to tea expressed extremely depressed views as to the ruinous results that must arise if the monetary policy of the Indian Government can be carried into effect. From the correspondence that has passed between the Government of India and the Secretary of State for the Colonies, it would seem that India has no objection to Ceylon establishing its own mint for the coinage of silver (the silver coins at present in use in Ceylon are rupees) and the island would then be in the same position as other silver-using countries. But if Ceylon starts its own mint, and is thus able to prevent the evils of the artificial scarcity of silver to be created in India with the view of forcing up the gold value of the rupee, then it is plain that Ceylon tea-planters would retain their present advantages, which arise from a low rate of exchange, and thus be able to carry on their business on far more advantageous conditions than their Indian rivals.