India and the Gold Standard

INDIA AND THE GOLD STANDARD BY H. F. HOWARD PREFACE EXCEPTIONAL interest attaches to the monetary system now in force in India, as representing a great practical experiment in the direction of the establishment of a Gold Exchange Standard, or, in other words, an arbitrary fixing of the parity of the standard silver coin with gold. It is somewhat curious that, though prior to the introduction of thi standard the proposals made formed the subject of much controversy, and though numerous articles relating to it have subsequently appeared in the press, no connected account of the currency system of India since her adoption of the standard has, so far as I am aware, been published. This book makes an attempt to furnish a description of the existing currency arrangements in India, and an explanation of the circumstances of their adoption and development I have also referred to certain subjects which are more or less directly connected with the Gold Exchange Standard in some of its aspects, such as Indias balance of trade and the alleged effect on prices of the coinage of rupees by the Government of India. Conditions in India, as in other undeveloped countries, differ from those in the more advanced countries in which a currency containing a large proportion of gold coins has been necessitated by economic requirements. The monometal lie standard with the free coinage of the standard metal possible in the case of the latter possesses a great element of strength as well as of simplicity, inasmuch as the standard coin of the country is available for export at its face value when trade demands so require. In India, however, and other Oriental countries the use of silver in large amounts is a vital necessity for everyday transactions. The adoption of the Gold Exchange Standard has made it possible for her to retain the silver in daily use, while at the same time eliminating the fluctuations of exchange between her and goldusing countries to which she was formerly liable. The rupee has under these arrangements been converted to a token coin. The advantages of a token coinagrare that it is economical, is not liable to br taken out of a country by exportation, and is less likely to be melted down than a coinage with an intrinsic value equivalent to its face value. The maintenance of such a currency necessarily involves some intervention on the part of the Government As, however, an American writer, Mr. C. A. Conant, has pointed out in connection with systems of the kind, constant interven tion by the Government is a part of the existence of any system, even where free and gratuitous coinage on private account is authorised by law. The advantage of a token currency is that the Government takes upon itself the responsibility for maintaining the par value of the coins by means of a gold reserve and takes the necessary steps to maintain this reserve..... The proposition is not to secure fixity of value between gold and silver bullion, but between gold and silver coins.