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IF you would learn about the Indian currency question do not go to India. I would not say that you will become the less able to understand it, but you will hardly become more so. If you stayed there for twenty years and kept a trained eye upon the question in all its bearings, your knowledge would probably be very valuable; but if you wish to understand the question in the space of a month or two, your time would not be well spent in going to India: you had much better stay at home and read Blue-Books. For the Englishman in India, knowing something of India, is the first to admit that he knows nothing about its currency question. He will probably be able to tell you a few of the inconveniences of having such a thing; but beyond that the native himself is not more unintelligible.

The rupee is a little thing, but it is at the bottom of the whole matter. The case is just this: if it were only the rupee and nothing more, all would be well — there would be no Indian currency question. Unfortunately the rupee is, or was until the Indian Government saw to it, also a bit of silver. At one and the same moment it was, and still is to some extent, a piece of money and a piece of merchandise — indissolubly, inalienably both. Now that imperative dual function — perhaps we ought rather to say that function and that attribute — is more than the little rupee is able to bear. Could it succeed in shaking off one, all would be well. To rid the rupee of its incubus — that is the aim of all these years of strenuous wrangling. That must be the aim of any legislation which is to abolish the Indian currency question. Which must go, then — the function or the attribute? The attribute, clearly. The rupee must continue to be money; there is no great reason why silver, the article of merchandise, should be rupees. What is wanted is to make the rupee a rupee, and nothing more. If that cannot be done, the rupee must give place to something else.

Let us try to be a little more explicit, less dogmatic. Money, economists tell us, is a medium of exchange and a measure of value. One of the requisites of an efficient measure of value is stability. A commodity which is worth so much this year and perhaps half as much again next may he a good speculation, but is certainly an extremely bad measure of value. It is not pleasant to find that to get quit of your bill you have to pay half as much again as you expected. Rather than run the risk of that people will do no business at all. But so it is, or much the same, with silver. Whether that is the fault of silver or of gold need not bother us. The point has its value as providing an outlet for the dangerous controversial energies of metallists, both mono- and bi-, but has not much to do with the Indian currency question. The fact remains that the value of silver as measured by gold is unstable.

That brings us to another rub. The value of silver as measured by gold might be as unstable as it liked, for anything India need care, but for India's dealings with the rest of the world. At this moment not only does the Indian ryot, who is most of India, not know that there is any such thing as a currency question — he would not know it in any case — but he is really very little the better or the worse for the particular circumstances which have produced it. But India has a great foreign trade, and India has a great foreign debt, and India employs a great many foreigners to manage her affairs. Now most of India's foreign trade is with gold-standard countries — that is to say, countries which measure their values in gold. Most of the money she owes was borrowed in gold; and her managers come from a gold-standard country, and want their pay in gold. It is her contact With the moving 'West that, monetarily speaking, worries India.

The rupee, being what it is, has followed silver. When silver has become cheaper in terms of gold the rupee has become cheaper with it. Whether the value of the rupee has followed that of silver exactly, or whether it has not, the argument is the same. Moreover, properly speaking, it is the exchange value of the rupee, rather than its value as a piece of silver, upon which the whole question hinges. Other factors than the gold price of silver contribute to the exchange value, at least since the closing of the mints; but neither need they be considered at this point. Silver is the main factor anyhow, and for the last quarter-century silver has been almost constantly on the down grade. One may say that the decline began in 1873, when Germany, flushed with the French millions, discarded silver and took to gold. In self-defence the countries of the Latin Union, which, by keeping their mints open to both gold and silver at a fixed ratio, had done so much towards keeping silver at its then accepted gold level, were forced to desert it. Probably also a very much more powerful factor in the fall, and therefore in its results, was the enormous development of silver mining. The average world's output of silver during the five years 1871-75 was rather more than 63¼ million ounces; by 1892 the year's output had increased to over 153 million ounces. At the same time the wealth of the world, as computed in money, increased very fast. Silver became inconvenient in itself as a basis of monetary systems. Moreover, every secession from the ranks of the silver-standard countries made the preservation of a silver standard more inconvenient, unprofitable, and dangerous to the residue. Desperate efforts were made to arrest the swift descent. International conferences were tried in vain. The unblushing and successful efforts of the silver men in the United States have cost that country millions upon millions of dollars. Yet all to no purpose. Silver, which stood at 5s. the ounce in 1872, had fallen below 3s. in 1893; the rupee exchange fell during the same period from 2s. to 1s. 2¼d. Country after country was throwing silver overboard and taking up gold in its place.

The year 1893 is one to be remembered in the monetary life of India. It is marked by the closing of the mints. Until 1893 anybody could bring as much silver as he liked to the Indian mints and receive rupees in exchange. In 1893 that right was abrogated by law. The position, as we have seen, was becoming serious. The rupee was down below 1s. 3d.; there seemed every likelihood of its falling lower still. Worse than all, there was no possibility of forecasting with any certainty what the rupee might or might not do. If it was to fall, nobody knew how far or how quickly; on the other hand, the fall might be varied by temporary recoveries. The fall which had already taken place had brought the Government to the verge of bankruptcy. The uncertainty was playing havoc with trade. True, a receding exchange had brought prosperity to some industries, but at the cost of the introduction of that speculative element which is highly deleterious to sound trading. Furthermore, the field for the disposal of silver was becoming so restricted that India ran the risk of becoming a dumping-ground for the world. But what chiefly made the position impossible was the impossible position of the Government — that was the main factor in the closing of the mints.

In every year the Government of India has to remit a very large sum of money to England, partly to meet home charges, partly to meet the interest on the sterling debt of India. This is done by selling in London drafts payable in India, which are bought by persons who want to pay away money in India. These Government drafts are put up to tender. The higher the tender — that is to say, the higher the price in sterling which the Indian Government can get for each rupee which it undertakes to pay in India, the better it is for the Indian Government — the fewer will be the rupees that the Government will have to collect in India; or, if you like, the rupees which it has will go all the further. When the rupee exchange fell from 2s. in 1872 to 1s. 2½d. in 1893, that meant that with each rupee of revenue the Government, instead of being able to discharge 2s. worth of obligation in England, was only able to discharge 1s. 2½d. worth. Imagine what that means when millions of pounds sterling are concerned. Sir James Mackay told the Indian Currency Committee in May of last year that had the rupee exchange stood at an average of is. between the closing of the mints in 1893 and March of last year (as it easily might have done had the mints remained open), instead of where it did, the cost to the Government and the Indian taxpayer Would in all likelihood have reached another nine millions sterling.

The decline and fall of the rupee has borne very hardly on those Englishmen in India who are paid a fixed number of rupees — civil servants, officers of the Indian army, and so forth. Not that the purchasing power of the rupee in India has varied a great deal; it has not. But many of these men are obliged to send home a part of their income to their wives and children; still more, put by what they can out of pay none too lavish as a nest-egg to fill out the pension when they get home again for good. Were salaries fixed on the basis of a low rate of exchange there would be no ground for complaint. But they are not; nor indeed has it been possible to fix them so when exchange has been oscillating as it has. It is annoying to find that while you have been sleeping a third of your savings has run away down the gutter of a falling exchange. Again, when a rupee was falling lower every year the value of rupee pensions, fixed at a higher rate and paid at a lower, fell with it. It is annoying to have to reduce your wine bill in your old age through no fault of your own.

The railways are very much on the same footing with the Government — those, that is to say, which are built with English capital, which are most of them. They borrowed their capital in sterling, took it out to India in sterling, must pay interest on it in sterling. But the native pays for his ticket with rupees or fractions of rupees. The lower the rate of exchange the fewer are the pounds, shillings, and pence that the native's rupees produce, and the less the railway company has left over to provide dividends for the shareholders. Of course many of the railways enjoy some sort of Government guarantee: if the dividend which such a company itself is able to pay fall below a certain point the Government makes itself responsible for the difference. That is very well for the company, but it makes the plight of the Government the more unpleasant. Moreover, it only makes the company's case a little better than it otherwise would be, for their British capital is wasting all the time. A sovereign brought out with the rupee at 2s. could only go back as 13s. 4d. with the rupee at 1s. 4d.

On the other hand, there is a section of India's foreign trade upon which the effect of a low and falling exchange is in a sense the very opposite. I refer to the exporters of Indian produce and manufactures — tea and indigo planters, cotton spinners and weavers, coal and gold miners, and the like. A good many of these people, usually companies, are like the railways in this respect, that they work with capital brought out from England: their interest must go over in sterling. They are also like the railways, in that the bulk of their working expenses is paid away in rupees. But, to their infinite advantage, they are unlike the railways, in that they are paid for their produce in the same currency in which they have to pay their interest. This does not apply to Indian exports to China, but it applies to her exports to Europe, Australia, the United States, and Japan. The advantage is obvious. So far from having to scrape together increasing myriads of rupees for the purpose of discharging their obligations, they are really for the moment much more comfortable when the rupee is falling than when it is even standing still. A sovereign's worth of tea, for instance, sent to England will bring back fifteen rupees with the exchange at Is. 4d., but only ten with the exchange at the old rate of 2s. Now whereas, as we have seen, prices and wages in India itself change very slowly, if at all, a sixteen-penny rupee will make a sovereign go about half as far again as a 2s. rupee; so that your planter has five rupees to play with, and can either pay a bigger dividend or reduce his prices, besides having no need to worry about expenses. He has usually done a little of each. It is not surprising that the planter and spinner have steadfastly stood by the low rupee. Yet as recently as last June the chairman of one of the Indian tea companies was congratulating his shareholders on the steadiness of the rupee in the region of is. 4d., because had it remained at 1s. 2½d. the stimulus to planting would have proved so violent that over-production and its consequent evils must certainly have resulted.

One other effect of a shifting rupee remains to be considered — its effect upon the introduction of capital into India. India is a country of vast natural resources, materially speaking, but those natural resources are very far from being fully developed; and nowadays vast resources can only be developed with the aid of vast capital. The accumulations of capital in the world are greater than ever before: never in the course of history has the available capital been more abundant; never has capitalistic enterprise been more vigorous. Yet there are people who say that India is hanging back in the march of what we call progress for want of these things. The restrictions or safeguards — the term varies with the point of view — imposed by the Indian Government have had something to do with it, though one of the earliest incidents of the new Viceroy's rule was their partial relaxation. But something of the blame undoubtedly rests with the rupee. Who is going to send capital to India when, for aught he can tell, in the course of a few months it might automatically, without the slightest action on his part, begin to vanish? That, as we have seen, is the effect of a falling rupee. True, during the past few years the rupee has firmed up, and bids fair, in the view of sanguine minds, to remain firm. But that is not good enough for your capitalist. He is as fearsome as a scalded cat. Therefore, ironically enough, this improved exchange, so far from bringing capital into the country, has had the opposite effect of taking it out. "We'll get our money back while we can," the capitalists have said among themselves. The exchange can hardly go much above 1s. 4d., thanks to the Government measures of 1893, and it might go down again as it has done before. Meanwhile India languishes for want of capital.

In 1892, then, things looked black. Silver and the rupee had fallen far, and bade fair to fall further. A brand-new International Conference failed of a bimetallic consummation. The Indian Government wrote home asking permission "to close the mints to the free coinage of silver, with a view to the introduction of a gold standard." In a word, the Indian Government was sick of drifting; and small wonder. Silver was all very well in its way, there was much to be said for it; but the game was not good enough, single-handed or nearly so. If the Indian Government had its way silver would go overboard. Lord Herschell's Committee thought it might have its way, and overboard silver went. The splash was terrific. The metallists swarmed round the spot where it fell, and cannonaded each other soundly in bloodless controversy. But silver was gone under and could not be raised. The sound of their cannonading was loud and long; but most of it was eminently premature: they hit each other for what they thought might result from each other's policies. Five years afterwards, in 1898, the hubbub had hushed a little, and the Indian Government, encouraged by the comparative stability of the rupee, and urged by the instability of commercial conditions, proceeded relentlessly with its design for the replacement of silver as the standard metal by gold; whereupon the Home Government appointed a committee to look into the matter.

The committee sat long and laboriously, and in the fulness of time the fruits of its labours appeared in the shape of three immense Blue-Books and an extremely able and lucid report. The Secretary of State approved; the Indian Government is probably only anxious to do the same, despite the somewhat summary treatment which its own proposals received at the committee's hands. By the time, therefore, that this book reaches the world, the Indian currency question will probably be in a fair way towards settlement; for the time being, let us add — for caution's and the silver men's sake.

What, then, is the plan which is to lay this ghost which has walked so long? In the first place, the committee declares for gold out and out. The British sovereign is to be a legal tender and a current coin in India. The Indian mints will take in all the gold that comes their way, giving sovereigns or rupees in exchange. At the same time, the rupee will continue to be an unlimited legal tender concurrently with the British sovereign, and it is to be worth Is. 4d. If, as the committee desires, an effective gold standard be thus established, "not only will stability and exchange with the great commercial countries of the world tend to promote her existing trade, but also there is every reason to anticipate that, with the growth and confidence in a stable exchange, capital will be encouraged to flow freely into India for the further development of her great natural resources." May the committee see true!

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