Rupee

“ Do not the facts furnish an incontrovertible proof of the futility of the exchange standard? How can a system which fails to maintain its value in terms of gold, which it is supposed to do, be regarded as a sound system of currency? There must be somewhere some weakness in the mechanism of a system which is liable to such occasional breakdowns. The rupee fell or rather was below par in 1893, and did not reach its parity to any real degree of firmness until 1900. After an interval of seven years the rupee again falls below par in 1907. ”

“ When the process by which the rupee comes into being is carefully analysed it becomes impossible to take seriously the plea that the Indian currency is economical. First of all, gold is tendered to the Secretary of State in London for his council bills, or gold is tendered to the Government of India in India in payment of taxes or otherwise. Out of this gold the Secretary of State buys silver and coins rupees. As the price of silver is below the [pg 296] ratio, there arises a difference between the cost price of the rupee and its selling price in gold. ”

“ We hear a great deal nowadays of the depreciation of the rupee; but in our government of India, unless we act on the principles which I have endeavoured to illustrate, by quotations from the writings of statesmen of the highest authority and experience of India, we may find in the days to come that we have a far more dangerous result to face, and that is the depreciation in the character of the millions under our rule. ”

“ The object should be to restore stability to the rupee, and to re-establish the automatic working of the currency system at as early a date as practicable.
“ (ii) The stable relation to be established should be with gold and not with sterling.
“ (iii) The gold equivalent of the rupee should be sufficiently high to give assurance, so far as is practicable, that the rupee, while retaining its present weight and fineness, will remain a token coin, or in other words, that the bullion value of the silver it contains will not exceed its exchange value. ”

“ Old rupees defaced, or those of native coinage, are sent down by the steamers from the Upper Provinces to Calcutta, to be re-coined. Accounts are carried on with their sub-divisions in rupees, annas, and pies; twelve pies make one anna, and sixteen annas make one rupee. The silver coins made at the Mint are rupees, half-rupees, and quarter-rupees, the copper are pice, double pice, and pies. ”

“ No more gold would be required in the one case than in the other. We can therefore conclude without fear of challenge that with a complete stoppage of rupee coinage Indian currency would be truly economical, prices would be more stable, and exchange secure, in the only way in which it can really be said to be secure, and the rupee, although inconvertible, will cease to be a problem, which it has been ever since 1873. ”

“ But where you have no self-adjusting and automatic currency, where the coin is an artificial token currency, such as our rupee is at the present moment, two out of three of these outlets are stopped. You cannot export the rupee without heavy loss, you cannot melt the rupee without heavy loss, and consequently the extra coins must return to the banks and coffers of the Government or they must be absorbed by the people. ”

“ As the rupee had a legally fixed ratio to another coin also valued by the Director,-the gold pound,-it is plain that the value of the rupee as so much silver and its value as a fraction of a pound might fall apart, and yet both be given by the Director's tables. ”

“ The silver rupee is also full legal tender.
The Government undertakes to give rupees for sovereigns, but does not undertake to give sovereigns for rupees, i.e. the rupee is an inconvertible currency unlimited in issue. ”

“ If, however, their food is provided, they take less pay—about 25 rupees—but prices generally have an upward tendency. The engagement may probably be for three or four months, which gives the ordinary European tourist time to get round India, visiting the principal places of interest en route. A rupee in India is now only worth one shilling and four-pence, and fifteen rupees are the equivalent of a sovereign, it should be remembered. ”

“ If rupees in India rise in purchasing power (i.e. if the Indian price-level falls) while pounds fall in purchasing power or remain stationary or rise less rapidly (i.e. if the English price-level rises relative to the Indian price-level) , fewer rupees would be worth as much as a pound, i.e. the exchange value of the rupee in terms of the pound will rise. ”

“ Besides the Government there have been statesmen in India so interested in the welfare of their fellow-subjects that they have rebuked the Government on several occasions for not making the profits on rupee coinage available for the advancement of the moral and material progress of the country,450 and in 1907 the profits on rupees were actually employed in the extension of railways. It must fill every one with horror and despair to contemplate the consequences sure to emanate from the manipulation of currency for such ends. ”

“ So long as the rupee is worth 1s. 4d. in gold, no merchant or manufacturer considers of what material it is made when he fixes the price of his product. The indirect effect on prices, due to the rupee’s being silver, is similar to the effect of the use of any medium of exchange, such as cheques or notes, which economises the use of gold. ”

“ The rupee currency is capable of easy expansion, but is not capable of easy contraction by reason of the fact that it is neither exportable nor meltable, nor is it convertible at will. The effects of such a currency as compared with those of an exportable currency were well brought out by the late Hon. Mr. Gokhale in a speech in which he observed:396
“Now, what is the difference if you have an automatic self-adjusting currency, such as we may have with gold or we had with silver before the year 1893, and the kind of artificial currency that we have at present? ”

“ South of Yung-ning I again had recourse to broken silver; but west of Tali-fu the Indian rupee is generally accepted, and at the town of Hsia Kuan, near Tali-fu, Indian rupees can be bought in any quantity by travellers and merchants bound for Burma. The Indian rupee is now a rare coin in Ssuch'uan, but sometimes it is treated like broken silver, being cut into pieces and sold by weight. I have in my possession several mutilated rupees which were weighed out to me as small change. The late queen-empress's head has been treated with small respect by the silver-merchants. ”

“ Five pice go to the anna. There are sixty or more pice in a rupee, according to the exchange, which can always be found out by reference to the money-changers in the bazaars. Formerly the coins were struck by hand. Quite recently His Highness has established a minting machine in Kabul. I think the new rupee is scarcely as artistic as the old: it is Europeanized, and it is said to be worth an anna less. Pice, too, are now being made in the minting machine. The Amîr is introducing the new rupee into circulation by paying the soldiers of his army with that coin. ”

“ Every one consequently tries to increase his stock of individual savings. Even the women earn money in a variety of ways. Every rupee saved is laid out at as high a rate of interest as possible. It is commonly stated that a rupee, laid out at the birth of a child at compound interest at 12 per cent., will amount to a lakh of rupees by the time he attains the age of a hundred. ”

“ It was up to the officers to see that the prices were not exorbitant. We always used Indian currency—the rupee and the anna. In normal times a rupee is about a third of a dollar. Throughout the occupied area Turkish currency also circulated, but the native invariably preferred to be paid in Indian. Curiously enough, even on entering towns like Tauq, we found the inhabitants eager for payment in rupees. I was told that in the money market in Baghdad a British advance would be heralded by a slump in Turkish exchange. ”

“ The increase in the weight of the rupee, also noticed in that despatch, is equally undeserving of attention, as, in fact, it would give no security for the future, and would entail a heavy charge without accomplishing the essential point to be aimed at. There remains the simpler, and first proposed suggestion, the limitation of the coinage of silver, which, though rejected in 1876 by the Government of India ... appears to us to call now for a closer examination. [pg 127]
“25. ”

“ The number of pice in a rupee constitutes its 205value; as the number of rupees and annas do that of a gold mohur; which, if sicca, from the Calcutta mint, ought invariably to pass at sixteen rupees. But the regulations of government have too often been openly trespassed, in the most daring manner. This was carried to such a pitch, that the whole of the silver currency at one time disappeared; the shroffs and sircars had bought it all up; so that persons in business were induced to offer premiums for silver ”

“ That such a depreciation is possible cannot be denied even by those who maintain that rupees are issued only in response to trade demand, otherwise why should they be so very anxious for an increase of the gold reserves of the country. But the danger to the rupee currency does not merely arise from the possibility of indiscretion on the part of the Government. ”

“ For more than eight months the gold in the currency reserve has exceeded, and the silver has been less, than the limits suggested in the despatch of June 18. By the middle of January the stock of gold in the currency reserve in India reached £5,000,000. The proposal [pg 280] made in that despatch was at once brought into operation; later on we sent supplies of sovereigns to the larger District Treasuries, with instructions that they should be issued to anyone who desired to receive them in payments due or in exchange for rupees ”

“ It is an effort in fact to maintain exchange as near as possible to the gold point. ... What would be the consequence if we yielded to the pressure placed on us and ceased to sell reverse councils at all? I can understand a demand that reverse councils should be sold by some different method, or at rates different from those at present in force, but I must confess that I cannot understand the demand that the facilities for the exchange of rupees into external currency should be entirely withdrawn. ”

“ The English introduced all over India a uniform currency of copper as well as of silver, and none of course were greater gainers in the long-run by this uniformity than the very poor. But, as usually happens in such cases, the memory of the occasional gain when the rupee brought more than its normal proportion of change, has outlived the recollection of the more frequent loss when it brought less; and the popular intelligence, however it may smart under the evils of an uncertain and irregular currency, is slow to recognise the benefits of uniformity. ”

“ Lindsay desired that Government should coin rupees to relieve the monetary stringency, Sir James Westland remarked425:—
“... in our opinion the silver standard is now a question of the past. It is a case of vestigia nulla retrorsum. [pg 277] The only question before us is how best to attain the gold standard. We cannot go back to the position of the open Mints. There are only two ways in which we can go back to that position. We can either open the Mints to the public generally, or we can open them to coinage by ourselves. ”

“ The rupee always consisted of sixteen annas, for the anna means only the sixteenth part of anything, but to the poor the great matter for consideration in all questions of currency is the quantity of small change they can get for the coin in which their wages are paid. ”

“ The British Residents constantly protested against the debasement of the currency, which caused the greatest inconvenience to them in obtaining reliable rupees for the payment of the troops and for the monetary transactions of the Residency, and they made constant but unsuccessful attempts to persuade the Nizam to close the private mints in the State and make the East India Company's rupee the sole legal currency. ”

“ As a result of these various measures, the rupee remains the local currency in India, but the Government take precautions for ensuring its convertibility into international currency at an approximately stable rate. The stability of the Indian system depends upon their keeping sufficient reserves of coined rupees to enable them at all times to exchange international currency for local currency; and sufficient liquid resources in sterling to enable them to change back the local currency into international currency, whenever they are required to do so. ”

“ In silver-standard countries it is gold which varies in price. Thus in India, where for centuries the standard of value has been the silver rupee now weighing 181180 grains and worth fifty years ago a little over two shillings, gold coins of the same weight called ‘mohurs’ were current at market price, about 16 rupees more or less. ”

“ At the present time, no surer does water seek its level than the after-dinner conversation of Anglo-Indian officials turns into the discussion of the great depreciation of the silver rupee and its relation to the exchange at home. As the rate of exchange goes lower and lower, and no corresponding increase of salary takes place, the natural result is a great deal of hardship and dissatisfaction among those who, from various causes, have to send money to England. ”