W — >m OU 56357 VERS RARY “1 7373 OSMANIA UNiyERSITY LffiRARY ^ Call Accession No. ft Ko-V' Author Ue. UiaePw-Vvl titfo Thisbookshouldbereturnedonorbeforethedatelastmarkedbiedow. THE PROBLEM OF THE RUPEE THE PROBLEM OF THE RUPEE ITS ORIGIN AND ITS SOLUTION BY AMBEPKAR B. R. Sometime Professor of Political Economy atthe Syden- ham College of Commerce and Economics, Bombay. LONDON P. S. KING & SON, LTD. ORCHARD HOUSE, 2 & 4 GREAT SMITH STREET WESTMINSTER DEDICATED TO THE MEMORY OP MY FATHER AND MOTHER AS A TOKEN OP MY ABIDING GRATITUDE FOR THE SACRIFICES THEY MADE AND THE ENLIGHTENMENT THEY SHOWED IN THE MATTER OF MY EDUCATION. Printedin GreatBritainbyButler &TannerLtd.,FromeandLondon PREFACE In the following pages I have attempted an exposi- tion of the events leading to the establishment of the exchange standard and an examination of its theoretical basis. In endeavouring to treat the historical side of the matter I have carefully avoided repeating what has already been said by others. For instance, in treating of the actual working of the exchange standard I have contented myself with a general treatment just sufficiently detailed to enable the reader to follow the criticism I have offered. If more details are desired they are given in all their amplitude in other treatises. To have reproduced them would have been a work of supererogation ; besides it would have only obscured the general trend of my argument. But in,( other respects I have been obliged to take a wider historical sweep than has been done by other writers. The existing treatises on Indian currency do not give any idea, at least an adequate idea, of the circumstances which led to the reforms of 1893. I think that a treatment of the early history is quite essential to furnish the reader with a perspective in order to enable liim to judge for himself the issues involved in the currency crisis and also of the solutions offered. In view of this I have gone into that most neglected period of Indian currency extending from 1800 to PREFACE VI 1893. Not only have other writers begun abruptly the story of the exchange standard, but they have * popularized the notion that the exchange standard is the standard originally contemplated by the Grovern- ment of India. I find that this is a gross error. Indeed the most interesting point about Indian currency is the way in which the gold standard came to be transformed into a gold exchange standard. Some old but by now forgotten facts had therefore to be recounted to expose this error. On the theoretical side there is no book but that of Professor Keynes which makes any attempt to examine its scientific basis. But the conclusions he has arrived at are in sharp conflict with those of mine. Our differences extend to almost every pro- position he has advanced in favour of the exchange standard. This difference proceeds from the funda- mental fact, which seems to be quite overlooked by ProfessorKeynes, that nothingwillstabilizetherupee unless we stabilize its general purchasing power. That the exchange standard does not do. That standard concerns itself only with symptoms and does not go to tfit disease : indeed, on my showing, if anything it aggravates the disease. When I come to the remedy I again find myself in conflict with the majority of those who like myself are opposed to the exchange standard. It is said that the best waj” to stabilize the rupee is to provide for effective convertibility into gold. I do not deny that this is one way of doing it. But I think a far better way would be to have an inconvertible rupee with a fixed limit of issue. Indeed, if I had any say in the matter I would propose that the Govern- ment of India should melt the rupees, sell them as