Chapter I: From a Double Standard to a Silver Standard (1)

Trade is an important apparatus in a society based on private property and pursuit of individual gain; without it, it would be difficult for its members to distribute the specialised products of their labour. Surely a lottery or an administrative device would be incompatible with its nature. Indeed, if it is to preserve its character, the only mode for the necessary distribution of the products of separate industry is that of private trading. But a trading society is unavoidably a pecuniary society, a society which of necessity carries on its transactions in terms of money. In fact, the distribution is not primarily an exchange of products against products, but products against money. In such a society, money therefore necessarily becomes the pivot on which everything revolves. With money as the focusing-point of all human efforts, interests, desires and ambitions, a trading society is bound to function in a régime of price where successes and failures are results of nice calculations of price-outlay as against price-product.

Economists have no doubt insisted that “there cannot … be intrinsically a more significant thing than money,” which at best is only “a great wheel by means of which every individual in society has his subsistence, conveniences and amusements regularly distributed to him [pg 2] in their proper proportions.” Whether or not money values are the definitive terms of economic endeavour may well be open to discussion.¹ But this much is certain, that without the use of money this “distribution of subsistence, conveniences and amusements,“ far from being a matter of course, will be distressingly hampered if not altogether suspended. How can this trading of products take place without money? The difficulties of barter have ever formed an unfailing theme with all economists, including those who have insisted that money is only a cloak. Money is not only necessary to facilitate trade by obviating the difficulties of barter, but is also necessary to sustain production by permitting specialisation. For who would care to specialise if he could not trade his products for those of others which he wanted? Trade is the handmaid of production, and where the former cannot flourish the latter must languish. It is therefore evident that if a trading society is not to be out of gear and is not to forego the measureless advantages of its automatic adjustments in the great give-and-take of specialised industry, it must provide itself with a sound system of money.²

At the close of the Moghul Empire, India, judged by the standards of the time, was economically an advanced country. Her trade was large, her banking institutions were well developed, and credit played an appreciable part in her transactions. But a medium of exchange and a common standard of value were among others the most supreme desiderata in the economy of the Indian people when they came, in the middle of the eighteenth century, under the sway of the British. Before the occurrence of this event, the money of India consisted of both gold and silver. Under the Hindu emperors the emphasis was laid on gold, while under the Mussalmans silver formed a large [pg 3] part of the circulating medium.³ Since the time of Akbar, the founder of the economic system of the Moghul Empire in India, the units of currency had been the gold _mohur_ and the silver _rupee_. Both coins, the mohur and the rupee, were identical in weight, i.e. 175 grs. troy,⁴ and were “supposed to have been coined without any alloy, or at least intended to be so.”⁵ But whether they constituted a single standard of value or not is a matter of some doubt. It is believed that the mohur and the rupee, which at the time were the common measure of value, circulated without any fixed ratio of exchange between them. The standard, therefore, was more of the nature of what Jevons called a parallel standard⁶ than a double standard.⁷ That this want of ratio could not have worked without some detriment in practice is obvious. But it must be noted that there existed an alleviating circumstance in the curious contrivance by which the mohur and the rupee, though unrelated to each other, bore a fixed ratio to the _dam_, the copper coin of the Empire.⁸ So that it is permissible to hold that, as a consequence of being fixed to the same thing, the two, the mohur and the rupee, circulated at a fixed ratio.

¹ Cf. W. C. Mitchell. “The Rationality of Economic Activity,”
_Journal of Political Economy_, 1910, Vol. XVIII, pp. 97 and 197;
also “The Rôle of Money in Economic Theory,” by the same, in the
_American Economic Review_ (Supplement), Vol. VI, No. 1, March
1916.

² For the whole of this discussion, cf. H. J. Davenport, _The
Economics of Enterprise_ (1913), Chapters II and III.

³ Prinsep, J., _Useful Tables_, Calcutta, 1834, pp. 15–16.

⁴ Robert Chalmers, _History of Colonial Currency_, 1893, pp. 336,
340.

⁵ Dr. P. Kelly, _The Universal Cambist_, 1311, p. 115.

⁶ _Money and Mechanism of Exchange_ (1890), p. 95.

⁷ Dr. P. Kelly’s view is that they circulated at their market ratio
(_loc. cit._). On the other hand, Sir R. Temple says: “In ancient
and mediaeval India the relative value of the coins of each metal
was fixed by the State, and all were legal tender virtually
without any formal limitation” (“General Monetary Practice in
India,” _Journal of the Institute of Bankers_, Vol. II, p. 406).
On another occasion he said: “The earliest Hindu currency was in
gold with a single standard. The Mohammedans introduced silver,
and in later times up to British rule there was a double standard,
gold and silver” (_ibid._, Vol. XV, p. 9). In contrast to this it
may be noted that the Preamble to currency Regulation XXXV of 1793
and other currency Regulations of early date make it a point to
emphasize that under pre-British régime there was no fixed ratio
between the mohur and the rupee.

⁸ Cf. Prof. S. V. Venkateswara, on “Moghul Currency and Coinage” in
the _Indian Journal of Economics_, July, 1918, p. 169; and F.
Atkinson, _The Indian Currency Question_ (1894), p. 1.

In Southern India, to which part the influence of the [pg 4] Moghuls had not extended, silver as a part of the currency system was quite unknown. The pagoda, the gold coin of the ancient Hindu kings, was the standard of value and also the medium of exchange, and continued to be so till the time of the East India Company.

The right of coinage, which the Moghuls always held as _inter jura Majestatis,_⁹ be it said to their credit was exercised with due sense of responsibility. Never did the Moghul Emperors stoop to debase their coinage. Making allowance for the imperfect technology of coinage, the coins issued from the various Mints situated even in the most distant parts of their Empire¹⁰ did not materially deviate from the standard.

──────────────────────────────────────────────────────────────────
Name of the Rupee Weight Name of the Rupee Weight
in pure in pure
Grs. Grs.
──────────────────────────────────────────────────────────────────
Akabari of Lahore 175·0 Delhi Sonat 175·0
──────────────────────────────────────────────────────────────────
Akabari of Agra 174·0 Delhi Alamgir 175·0
──────────────────────────────────────────────────────────────────
Jehangiri of Agra 174·6 Old Surat 174·0
──────────────────────────────────────────────────────────────────
Jehangiri of 173·6 Murshedabad 175·9
Allahabad
──────────────────────────────────────────────────────────────────
Jehangiri of Kandahar 173·9 Persian Rupee of 1745 174·5
──────────────────────────────────────────────────────────────────
Shehajehani of Agra 175·0 Old Dacca 173·3
──────────────────────────────────────────────────────────────────
Shehajehani of 174·2 Muhamadshai 170·0
Ahamadabad
──────────────────────────────────────────────────────────────────
Shehajehani of Delhi 174·2 Ahamadshai 172·8
──────────────────────────────────────────────────────────────────
Shehajehani of Delhi 175·0 Shaha Alam (1772) 175·8
──────────────────────────────────────────────────────────────────
Shehajehani of Lahore 174·0
──────────────────────────────────────────────────────────────────
[pg 5] The table on p. 4 of the assays of the Moghul rupees shows how
the coinage throughout the period of the Empire adhered to the standard
weight of 175 grs. pure.¹¹

⁹ According to the Mohammedan historian, Khafi Khan, it enraged the
Emperor Aurangzeb when the East India Company in 1694 coined some
rupees at Bombay “with the name of their impure king” (_Imperial
Gazetteer of India_, Vol. IV, p. 515).

¹⁰ It is stated in the _Imperial Gazetteer of India_ (Vol. IV., p.
514), that in the early days of the Moghul rule there was only one
Mint—at Delhi—which struck the Imperial coins. The Emperor Sher
Sha was the first to introduce a plurality of Mints for coinage
purposes—a practice continued and extended by the later emperors
until between the reigns of Akbar and Bahadur Sha II the Mints
numbered about 200. From the _East India Moral and Material
Progress Report for_ 1872–73 it is clear that not every Mint was
open to the coinage of all three metals, gold, silver and copper;
but that some Mints coined only gold, others silver, and the rest
copper (_see_ Report, pp. 11–12).

¹¹ Prinsep, J., op. cit., p. 18.

So long as the Empire retained unabated sway there was advantage rather than danger in the plurality of Mints, for they were so many branches of a single department governed by a single authority. But with the disruption of the Moghul Empire into separate kingdoms these branches of the Imperial Mint located at different centres became independent factories for purposes of coinage. In the general scramble for independence which followed the fall of the Empire, the right to coinage, as one of the most unmistakable insignia of sovereignty, became the right most cherished by the political adventurers of the time. It was the last privilege to which the falling dynasties clung, and was also the first to which the adventurers rising to power aspired. The result was that the right, which was at one time so religiously exercised, came to be most wantonly abused. Everywhere the Mints were kept in full swing, and soon the country was filled with diverse coins which, while they proclaimed the incessant rise and fall of dynasties, also presented bewildering media of exchange. If these money-mongering sovereigns had kept up their issues to the original standard of the Moghul Emperors the multiplicity of coins of the same denomination would not have been a matter of much concern. But they seemed to have held that as the money used by their subjects was made by them, they could do what they liked with their own, and proceeded to debase their coinage to the extent each chose without altering the denominations. Given the different degrees of debasement, the currency necessarily lost its primary quality of general and ready acceptability.

The evils consequent upon such a situation may well be imagined. When the contents of the coins belied the value indicated by their denomination they became mere merchandise and there was no more a currency by tale to act as a ready means of exchange. The bullion value of each coin had to be ascertained before it could be accepted as a final [pg 6] discharge of obligations.¹² The opportunity for defrauding the poor and the ignorant thus provided could not have been less¹³ than that known to have obtained in England before the great re-coinage of 1696. This constant weighing, valuing, and assaying the bullion contents of coins was, however, only one aspect in which the evils of the situation made themselves felt. They also presented another formidable aspect. With the vanishing of the Empire there ceased to be such a thing as an Imperial legal tender current all through India. In its place there grew up local tenders current only within the different principalities into which the Empire was broken up. Under such circumstances exchange was not liquidated by obtaining in return for wares the requisite bullion value from the coins tendered in payment. Traders had to be certain that the coins were also legal tender of their domicile. The Preamble to the Bengal Currency Regulation XXXV, of 1793, is illuminating on this point. It says:—

“The principal districts in Bengal, Bihar and Orissa, have each
a distinct silver currency … which are the standard measure of
value in all transactions in the districts in which they
respectively circulate.

――――――――

“In consequence of the Ryots being required to pay their rent in
a particular sort of rupee they of course demanded it from
manufacturers in payment of their grain, or raw [pg 7]
materials, whilst the manufacturers, actuated by similar
principles with the Ryots, required the same species of rupee
from the traders who came to purchase their cloth or their
commodities.

“The various sorts of old rupees, accordingly, soon became the
established currency of particular districts, and as a necessary
consequence the value of each rupee was enhanced in the district
in which it was current, for being in demand for all
transactions. As a further consequence, every sort of rupee
brought into the district was rejected from being a different
measure of value from that by which the inhabitants had become
accustomed to estimate their property, or, if it was received, a
discount was exacted upon it, equal to what the receiver would
have been obliged to pay upon exchanging it at the house of a
shroff for the rupee current in the district, or to allow
discount upon passing it in payment to any other individual.

――――――――

“From this rejection of the coin current in one district when
tendered in payment in another, the merchants and traders, and
the proprietors and cultivators of land in different parts of
the country, are subjected in their commercial dealings with
each other to the same losses by exchange, and all other
inconveniences that would necessarily result were the several
districts under separate and independent governments, each
having a different coin.”

¹² It was this necessity for ascertaining the true bullion value of
the debased coins which gave rise to that class of money-changers
known as Shroffs, who specialised in the business of evaluating
the coins at their proper discount from the standard purity by
means of the dates and other characteristics engraved upon them.

¹³ It is stated that Dr. Roxburgh, who was an eye-witness, was so
much impressed by the sufferings of the poor owing to the bad
state of the currency that he urged upon A. Dalrymple in a letter
dated June 30, 1791, to give prominence to the evils by inserting
a paper in his _Oriental Repertory_ (2 vols., London, 1808), “on
the current coin in circulation over the Company’s Territories
which might be productive of the most solid and lasting advantage
to the Governing and the Governed,” and added, “You may be able to
correct the evil, by which you will certainly go to heaven, if the
prayers of the poor avail, and I may get a step nearer paradise.”
_Observations on the Copper Coinage wanted in the Circars_, by A.
Dalrymple, London, 1794, p. 1.

Here was a situation where trade was reduced to barter, whether one looks upon barter as characterised by the absence of a common medium of exchange or by the presence of a plurality of the media of exchange; for in any case, it is obvious that the want of a “double coincidence” must have been felt by people engaged in trade. One is likely to think that such could not have been the case as the medium was composed of metallic counters. But it is to be remembered that the circulating coins on India, by reason of the circumstance attendant upon the diversity in their fineness and legal tender, formed so many different species that an exchange against a particular species did not necessarily close the transaction; the coin must, in certain circumstances, have been only an intermediate to be further bartered against another, and so on till the one of the requisite species was [pg 8] obtained. This is sufficient indication that society had sunk into a state of barter. If this alone was the flaw in the situation, it would have been only as bad as that of international trade under diversity of coinages. But it was further complicated by the fact that although the denomination of the coins was the same, their metallic contents differed considerably. Owing to this, one coin bore a discount or a premium in relation to another of the same name. In the absence of knowledge as to the amount of premium or discount, every one cared to receive a coin of the species known to him and current in his territory. On the whole the obstacles to commerce arising from such a situation could not have been less than those emanating from the mandate of Lycurgus, who compelled the Lacedæmonians to use iron money in order that its weight might prevent them from overmuch trading. The situation, besides being irritating, was aggravated by the presence of an element of gall in it. Capital invested in providing a currency is a tax upon the productive resources of the community. Nevertheless, wrote James Wilson¹⁴ no one would question

“that the time and labour which are saved by the interposition
of coin, as compared with a system of barter, form an ample
remuneration for the portion of capital withdrawn from
productive sources, to act as a single circulator of
commodities, by rendering the remainder of the capital of the
country so much the more productive.”

¹⁴ _Capital, Currency and Banking_, 1847, p. 15.

What is, then, to be said of a monetary system which did not obviate the evil consequences of barter, although enormous capital was withdrawn from productive sources, to act as a single circulator of commodities? Diseased money is worse than want of money. The latter at least saves the cost. But society must have money, and it must be good money, too. The task, therefore, of evolving good money out of bad money fell upon the shoulders of the English East India Company, who had in the meanwhile succeeded to the Empire of the Moghuls in India.

The lines of reform were first laid down by the Directors [pg 9] of the Company in their famous Despatch, dated April 25, 1806,¹⁵ to the authorities administering their territories in India. In this historic document they observed:—

¹⁵ H. of C. Return 127 of 1898.

“17. It is an opinion supported by the best authorities, and
proved by experience, that coins of gold and silver cannot
circulate as legal tenders of payment at fixed relative values …
without loss; this loss is occasioned by the fluctuating value
of the metals of which the coins are formed. A proportion
between the gold and silver coin is fixed by law, according to
the value of the metals, and it may be on the justest
principles, but owing to the change of circumstances gold may
become of greater value in relation to silver than at the time
the proportion was fixed, it therefore becomes profitable to
exchange silver or gold, so the coin of that metal is withdrawn
from circulation; and if silver should increase in its value in
relation to gold, the same circumstances would tend to reduce
the quantity of silver coin in circulation. As it is impossible
to prevent the fluctuation in the value of the metals, so it is
also equally impracticable to prevent the consequences thereof
on the coins made from these metals … To adjust the relative
values of gold and silver coin according to the fluctuations in
the values of the metals would create continual difficulties,
and the establishment of such a principle would of itself tend
to perpetuate inconvenience and loss.”

They therefore declared themselves in favour of monometallism as the ideal for the Indian currency of the future, and prescribed:—

“21. … that silver should be the universal money of account [in
India], and that all … accounts should be kept in the same
denominations of rupees, annas and pice …”

The rupee was not, however, to be the same as that of the Moghul Emperors in weight and fineness. They proposed that

“9. … the new rupee … be of the gross weight of—

────────────────────────────────
Troy grains 180
Deduct one-twelfth alloy 15
――
An contain of fine silver 165
troy grs.
────────────────────────────────

[pg 10] Such were the proposals put forth by the Court of Directors for the reform of Indian currency.

The choice of a rupee weighing 180 grs. troy and containing 165 grs. pure silver as the unit for the future currency system of India was a well-reasoned choice.

The primary reason for selecting this particular weight for the rupee seems to have been the desire to make it as little of a departure as possible from the existing practice. In their attempts to reduce to some kind of order the disorderly currencies bequeathed to them by the Moghuls by placing them on a bimetallic basis, the Governments of the three Presidencies had already made a great advance by selecting out of the innumerable coins then circulating in the country a species of gold and silver coin as the exclusive media of exchange for their respective territories. The weights and fineness of the coins selected as the principal units of currency, with other particulars, may be noted from the summary table opposite.

To reduce these principal units of the different Presidencies to a single principal unit, the nearest and the least inconvenient magnitude of weight which would at the same time be an integral number was obviously 180 grs., for in no case did it differ from the weights of any of the prevailing units in any marked degree. Besides, it was believed that 180, or rather 179·5511, grs. was the standard weight of the rupee coin originally issued from the Moghul Mints, so that the adoption of it was really a restoration of the old unit and not the introduction of a new one.¹⁶ Another advantage claimed in favour of a unit of 180 grs. was that such a unit of currency would again become what it had ceased to be, the unit of weight also. It was agreed¹⁷ that the unit of weight in India had at all times previously been linked up with that of the principal coin, so that the _seer_ and the manual weights were simply multiples of the rupee, which originally weighed 179·6 grs. troy. Now, if the weight of the [pg 11]

TABLE I

_Principal Units of Currency_

────────────────────────────────────────────────────────────────────────────────────────────────────────────────
Issued Territory Date Silver Coins Gold Coins
by in and ──────────────────────────────────────────────────────────────────────────
the which Authority Name Gross Pure Name Gross Pure
Government it of Weight Contents Weight Contents
of circulated Issue. Troy Troy Grs. Troy Grs. Troy Grs.
Grs.
────────────────────────────────────────────────────────────────────────────────────────────────────────────────
Bombay Presidency Surat 179·0 164·740 Mohur 179 164·740
Rupee
────────────────────────────────────────────────────────────────────────────────────────────────────────────────
Madras Presidency Arcot 176·4 166·477 Star 52·40 42·55
Rupee Pagoda
────────────────────────────────────────────────────────────────────────────────────────────────────────────────
Bengal, Regulations Sicca
Bihar and XXXV of Rupee
Orissa 1793 (19th 179·66 175·927 Mohur 190·804 189·40
──────────────────────────── Sun)
Cuttock XII of 1805
─────────────────────────────────────────────────────────────────────────────────────────────────────
Ceded Furrakabad
Provinces Rupee
Bengal ────────────── (Lucknow
Conquered XLV of 1803 Sicca 173 166·135 — — —
Provinces of
the
45th
Sun)
─────────────────────────────────────────────────────────────────────────────────────────────────────
Benares III of 1806 Benares 175 168·875 — — —
Provinces Rupee
(Muchleedar)
────────────────────────────────────────────────────────────────────────────────────────────────────────────────

¹⁶ Cf. The Despatch, op. cit., par. 8.

¹⁷ Cf. para. 26–28 of the letter from James Prinsep to the Calcutta
Mint Committee, printed in the Appendix to the Indian Tables by
John Muller, Calcutta, 1836.

¹⁸ _Ibid._ par. 28. How the English and the Indian systems of
weights were made to correspond to each other may be seen from the
following:—

─────────────────────────────────────────────────────
_Indian._ _English._
8 = 1 massa = 15 troy grs.
ruttees
12 = 1 tola (or = 180 troy grs.
massas sicca)
80 tolas = 1 seer = 2½ troy
pounds.
40 seers = 1 maund (or = 100 troy
mun) pounds.
─────────────────────────────────────────────────────

[pg 12] principal coin to be established was to be different from 180 grs. troy, it was believed there would be an unhappy deviation from the ancient practice which made the weight of the coin the basis of other weights and measures. Besides, a unit of 180 grs. weight was not only suitable from this point of view, but had also in its favour the added convenience of assimilating the Indian with the English units of weight.¹⁸

While these were the reasons in favour¹⁹ of fixing the weight of the principal unit of currency at 180 grs. troy, the project of making it 165 grs. fine was not without its justification. The ruling consideration in selecting 165 grs. as the standard of fineness was, as in the matter of selecting the standard weight, to cause the least possible disturbance in existing arrangements. That this standard of fineness was not very different from those of the silver coins recognised by the different Governments in India as the principal units of their currency, may be seen from the following comparative statement on p. 13.

¹⁹ Attention may be drawn in this connection to the dissenting
opinion of Captain Jervis on the project of 180 grs. troy as the
unit of weight for the rupee. Cf. his most exhaustive treatise
called _The Expediency and Facility of establishing the
Metrological and Monetary Systems throughout India on a Scientific
and Permanent Basis, grounded on an Analytical Review of the
Weights, Measures and Coins of India_ …, Bombay, 1836, pp. 49–64.

It will thus be seen that, with the exception of the Sicca and the Benares rupees, the proposed standard of fineness agreed so closely with those of the other rupees that the interest of obtaining a complete uniformity without considerable dislocation overruled all possible objections to its adoption. Another consideration that seemed to have prevailed upon the Court of Directors in selecting 165 grs. [pg 13] as the standard of fineness was that, in conjunction with 180 grs. as the standard weight, the arrangement was calculated to make the rupee eleven-twelfths fine. To determine upon a particular fineness was too technical a matter for the Court of Directors. It was, however, the opinion of the British Committee on Mint and Coinage, appointed in 1803, that²⁰ “one–twelfth alloy and eleven–twelfths fine is by a variety of extensive experiments proved to be the best proportion, or at least as good as any which could have been chosen.” This standard, so authoritatively upheld, the Court desired to incorporate in their new scheme of Indian currency. They therefore desired to make the rupee eleven–twelfths fine. But to do so was also to make the rupee 165 grs. pure—a content which they desired, from the point of view stated above, the rupee to possess.

²⁰ Cf. The Despatch, op. cit., par. 9.

TABLE II

_Deviations of the Proposed Standard of Fineness from that
of the Principal Recognized Rupees_

────────────────────────────────────────────────────────────────────── Silver Coins recognized More valuable Less valuable as Principal Units and Standard than the than the their Fineness. Fineness Proposed proposed of Rupee. Rupee. ─────────────────────────── the ───────────────────────────────── Name of the Its Pure Proposed In By In By Coin. Contents. Rupee. Grs. p.c. Grs. p.c. Troy Grs. ────────────────────────────────────────────────────────────────────── Surat Rupee 164·74 165 — — ·26 ·157 ────────────────────────────────────────────────────────────────────── Arcot Rupee 166·477 165 1·477 ·887 — — ────────────────────────────────────────────────────────────────────── Sicca Rupee 175·927 165 10·927 6·211 — — ────────────────────────────────────────────────────────────────────── Furrukabad 166·135 165 1·135 ·683 — — R. ────────────────────────────────────────────────────────────────────── Benares 169·251 165 4·251 2·511 — — Rupee ──────────────────────────────────────────────────────────────────────

Reviewing the preference of the Court of Directors for monometallism from the vantage-ground of latter-day events, one might be inclined to look upon it as a little too short-sighted. At the time, however, the preference was well founded. One of the first measures the three Presidencies, into which the country was divided for [pg 14] purposes of administration, had adopted on their assuming the government of the country, was to change the parallel standard of the Moghuls into a double standard by establishing a legal ratio of exchange between the mohur, the pagoda, and the rupee. But in none of the Presidencies was the experiment a complete success.

In Bengal²¹ the Government, on June 2, 1766, determined upon the issue of a gold mohur weighing 179·66 grs. troy, and containing 149·92 grs. troy of pure metal, as legal tender at 14 Sicca rupees, to relieve the currency stringency caused largely by its own act of locking up the revenue collections in its treasuries, to the disadvantage of commerce. This was a legal ratio of 16·45 to 1, and as it widely deviated from the market ratio of 14·81 to 1, this attempt to secure a concurrent circulation of the two coins was foredoomed to failure. Owing to the drain of silver on Bengal from China, Madras, and Bombay, the currency stringency grew worse, so much so that another gold mohur was issued by the Government on March 20, 1769, weighing 190·773 grs. troy and containing 190·086 grs. pure gold with a value fixed at 16 Sicca rupees. This was a legal ratio of 14·81 to 1. But, as it was higher than the market ratio of the time both in India (14 to 1) and in Europe (14·61 to 1), this second effort to bring about a concurrent circulation fared no better than the first. So perplexing seemed to be the task of accurate rating that the Government reverted to monometallism by stopping the coinage of gold on December 3, 1788, and when the monetary stringency again compelled it to resume in 1790 the coinage of gold, it preferred to let the mohur and the rupee circulate at their market value without making any attempt to link them by a fixed ratio. It was not until 1793 that a third attempt was made to forge a double standard in Bengal. A new mohur was issued in that year, weighing 190·895 grs. troy and containing 189·4037 grs. of pure gold, and made legal tender at 16 Sicca rupees. This [pg 15] was a ratio of 14·86 to 1, but, as it did not conform to the ratio then prevalent in the market, this third attempt to establish bimetallism in Bengal failed as did those made in 1766 and 1769.

²¹ F. C. Harrison, “The Past Action of the Indian Government with
regard to Gold,” in _Economic Journal_, Vol. III, p. 54 _et seq_.
Also Minute by Sir John Shore, in Bengal Public Consultations,
dated September 29, 1796.

The like endeavours of the Government of Madras²² proved more futile than those of Bengal. The first attempt at bimetallism under the British in that Presidency was made in the year 1749, when 350 Arcot rupees were legally rated at 100 Star pagodas. As compared with the then market ratio this rating involved an under-valuation of the pagoda, the gold coin of the Presidency. The disappearance of the pagoda caused a monetary stringency, and the Government in December, 1750, was obliged to restore it to currency. This it did by adopting the twofold plan of causing an import of gold on Government account, so as to equalise the mint ratio to the market ratio, and of compelling the receipts and payments of Government treasuries to be exclusively in pagodas. The latter device proved of small value; but the former by its magnitude was efficacious enough to ease the situation. Unluckily the ease was only temporary. Between 1756 and 1771 the market ratio of the rupee and the pagoda again underwent a considerable change. In 1756 it was 364 to 100, and in 1768 it was 370 to 100. It was not till after 1768 that the market ratio became equal to the legal ratio fixed in 1749 and remained steady for about twelve years. But the increased imports of silver rendered necessary for the prosecution of the second Mysore war once more disturbed the ratio, which at the close of the war stood at 400 Arcot rupees to 100 Star pagodas. After the end of the war the Government of Madras made another attempt to bring about a concurrent circulation between the rupee and the pagoda. But instead of making the market ratio of 400 to 100 the legal ratio it was led by the then increasing imports of gold into the Presidency to hope that the market ratio would in time rise to that legally established in 1749. In an expectant mood so induced it decided, in 1790, to anticipate the event by fixing the ratio first at 365 to 100. [pg 16] The result was bound to be different from that desired, for it was an under-valuation of the pagoda. But instead of rectifying the error, the Government proceeded to aggravate it by raising the ratio still further to 350 to 100 in 1797, with the effect that the pagoda entirely went out of circulation, and the final attempt at bimetallism thus ended in a miserable failure.

²² H. Dodwell, “Substitution of Silver for Gold in South India,” in
the _Indian Journal of Economics_, January, 1921.

The Government of Bombay seemed better instructed in the mechanics of bimetallism, although that did not help it to overcome the practical difficulties of the system. On the first occasion when bimetallism was introduced in the Presidency²³ the mohur and the rupee were rated at the ratio of 15·70 to 1. But at this ratio the mohur was found to be over-rated, and accordingly, in August, 1774, the Mint Master was directed to coin gold mohur of the fineness of a Venetian and of the weight of the silver rupee. This change brought down the legal ratio to 14·83 to 1, very nearly, though not exactly, to the then prevailing market ratio of 15 to 1, and had nothing untoward happened, bimetallism would have had a greater success in Bombay than it actually had in the other two Presidencies. But this was not to be, for the situation was completely altered by the dishonesty of the Nawab of Surat, who allowed his rupees, which were of the same weight and fineness as the Bombay rupees, to be debased to the extent of 10, 12, and even 15 per cent. This act of debasement could not have had any disturbing effect on the bimetallic system prevalent in the Bombay Presidency had it not been for the fact that the Nawab’s (or Surat) rupees were by agreement admitted to circulation in the Company’s territories at par with the Bombay rupees. As a result of their being legal tender the Surat rupees, once they were debased, not only drove out the Bombay rupees from circulation, but also the mohur, for as rated to the debased Surat rupees the ratio became unfavourable to gold, and the one chance for a successful bimetallic system vanished away. The question of fixing up a bimetallic [pg 17] ratio between the mohur and the rupee again cropped up when the Government of Bombay permitted the coinage of Surat rupees at its Mint. To have continued the coinage of the gold mohur according to the Regulation of 1774 was out of the question. One Bombay mohur contained 177·38 grs. of pure gold, and 15 Surat rupees of the standard of 1800 contained 247,110 grs. of silver. By this Regulation the proportion of silver to gold would have been \frac{247,110}{177·38} i.e. 13·9 to 1. Here the mohur would have under-valued. It was therefore resolved to alter the standard of the mohur to that of the Surat rupee, so as to give a ratio of 14·9 to 1. But as the market ratio was inclined towards 15·5 to 1, the experiment was not altogether a success.

²³ Report of Dr. Scott on the History of Coinage in the Bombay
Presidency, with Appendices, Public Consultations (Bombay, dated
January 27, 1801).

In the light of this experience before them the Court of Directors of the East India Company did well in fixing upon a monometallic standard as the basis of the future currency system of India. The principal object of all currency regulations is that the different units of money should bear a fixed relation of value to one another. Without this fixity of value the currency would be in a state of confusion, and no precaution would be too great against even a temporary disturbance of that fixity. Fixity of value between the various components of the currency is so essential a requisite in a well-regulated monetary system that we need hardly be surprised if the Court of Directors attached special importance to it, as they may well have done, particularly when they were engaged in the task of placing the currency on a sound and permanent footing. Nor can it be said that their choice of monometallism was ill-advised, for it must be admitted that a single standard better guarantees this fixity than does the double standard. Under the former it is spontaneous; under the latter it is forced.

These recommendations of the Court of Directors were left to the different Governments in India to be carried into effect at their discretion as to the time and manner of doing it. But it was some time before steps were taken in consonance with these orders, and even then it was on the realisation of those parts of the program of the Court which pertained [pg 18] to the establishment of a uniform currency that the efforts of the different Governments were first concentrated.

The task of reducing the existing units of currency to that proposed by the Court was first accomplished in Madras. On January 7, 1818, the Government issued a Proclamation²⁴ by which its old units of currency—the Arcot rupee and the Star pagoda—were superseded by new units, a gold rupee and a silver rupee, each weighing 180 grs. troy and containing 165 grs. of fine metal. Madras was followed by Bombay six years later by a Proclamation²⁵ of October 6, 1824, which declared a gold rupee and a silver rupee of the new Madras standard to be the only units of currency in that Presidency. The Government of Bengal had a much bigger problem to handle. It had three different principal units of silver currency to be reduced to the standard proposed by the Court. It commenced its work of reorganisation by a system of elimination and alteration. In 1819, it discontinued²⁶ the coinage of the Benares rupee and substituted in its place the Furrukabad rupee, the weight and fineness of which were altered to 180·234 and 135·215 grs. troy respectively. Apparently this was a step away from the right direction. But even here the purpose of uniformity, so far as fineness was concerned, was discernible, for it made the Furrukabad rupee like the new Madras and Bombay rupees, eleven-twelfths fine. Having got rid of the Benares rupee, the next step was to assimilate the standard of the Furrukabad rupee to that of Madras and Bombay, and this was done in 1833.²⁷

²⁴ Cf. Fort St. George Public Depart. Consultations, No. 19, dated
January 7, 1818.

²⁵ Cf. Bombay Financial Consultations, dated October 6, 1824.

²⁶ Bengal Regulation XI of 1819.

²⁷ Bengal Regulation VII of 1833.

Thus, without abrogating the bimetallic system, substantial steps were taken in realising the ideal unit proposed by the Court, as may be seen from the table on opposite page.

Taking stock of the position as it was at the end of 1833, we find that with the exception of the Sicca rupee and the gold mohur of Bengal, that part of the scheme of the Directors which pertained to the uniformity of coinage was an accomplished fact. Nothing more remained to carry it [pg 19]

TABLE III

_Uniformity of Coinage at the end of A.D. 1833_

─────────────────────────────────────────────────────────────────────────────────────────────── Issued Silver Gold Coins. by Coins. Legal the ───────────────────────────────────────────────────────────────────────────── Ratio Government Denomination. Weight. Fineness. Denomination. Weight. Fineness. of ─────────────────────────────────────────────────────────────────────────────────────────────── Sicca Rupee 192 176 or Mohur 204·710 187·651 1 to 11⁄12 15 Bengal ──────────────────────────────────────────────────────────────────────────────────── Furrukabad 180 165 or — — — — Rupee 11⁄12 ─────────────────────────────────────────────────────────────────────────────────────────────── Bombay Silver Rupee 180 165 or Gold Rupee 180 165 or 1 to 11⁄12 11⁄12 15 ─────────────────────────────────────────────────────────────────────────────────────────────── Madras Silver Rupee 180 165 or Gold Rupee 180 165 or 1 to 11⁄12 11⁄12 15 ───────────────────────────────────────────────────────────────────────────────────────────────

to completion than to discontinue the Sicca rupee and to demonetise gold. At this point, however, arose a conflict between the Court of Directors and the three Governments in India. Considerable reluctance was shown to the demonetisation of gold. The Government of Madras, which was the first to undertake the reform of its currency according to the plan of the Court, not only insisted upon continuing the coinage of gold along with that of the rupee,²⁸ but stoutly refused to deviate from the system of double legal tender at a fixed ratio prevalent in its territories,²⁹ notwithstanding the repeated remonstrance’s addressed by the Court.³⁰ The Government of Bengal clung to the bimetallic standard with equal tenacity. Rather than demonetise the gold mohur it took steps to alter its standard³¹ by reducing its pure contents³² from 189·4037 to 187·651 troy [pg 20] grs., so as to re-establish a bimetallic system on the basis of the ratio adopted by Madras in 1818. So great was its adherence to the bimetallic standard that in 1833 it undertook to alter³³ the weight and fineness of the Sicca rupee to 196 grs. troy and 176 grs. fine, probably to rectify a likely divergence between the legal and the market ratios of the mohur to the rupee³⁴.

²⁸ The Court of Directors were willing to permit the coinage and
circulation of gold _unlinked_ to the rupee, for they had observed
in their Despatch:—

“16. Although we are fully satisfied of the propriety of the
silver rupee being the principal measure of value and the money of
account, yet we are by no means desirous of checking the
circulation of gold, but of establishing a gold coin on a
principle fitted for general use. This coin in our opinion should
be called a gold rupee and be made of the same standard as the
silver rupee.”

²⁹ Cf. Fort St. George Public Consultations of August 19, 1817,
particularly the letter of the Accountant-General entered thereon.

³⁰ Cf. The Public Despatches to Madras dated March 6, 1810; July 10,
1811; and June 12, 1816.

³¹ Preamble to the Bengal Regulation XIV of 1818.

³² It, however, increased its weight from 190·895 to 204·710 troy
grs.

³³ Bengal Regulation VII of 1833.

³⁴ It may be that this alteration was also intended to make the Sicca
rupee eleven-twelfths fine.

But in another direction the Government in India wanted to go further than the Court desired. The Court thought a uniform currency (i.e. a currency composed of like but independent units) was all that India needed. Indeed, they had given the Governments to understand that they did not wish for more in the matter of simplification of currency and were perfectly willing to allow the Sicca and the mohur to remain as they were, unassimilated.³⁵ A uniform currency was no doubt a great advance on the order of things such as was left by the successors of the Moghuls. But that was not enough, and the needs of the situation demanded a common currency based on a single unit in place of a uniform currency. Under the system of uniform currency each Presidency coined its own money, and the money coined at the Mints of the other Presidencies was not legal tender in its territories except at the Mint. This monetary independence would not have been very harmful if there had existed also financial independence between the three Presidencies. As a matter of fact, although each Presidency had its own fiscal system, yet they depended upon one another for the finance of their deficits. There was a regular system of “supply” between them, and the surplus in one was being constantly drawn upon to meet the deficits in others. In the absence of a common currency this resource operation was considerably hampered. The difficulties caused by the absence of a common currency in the way of the “supply” operation made themselves felt in two different ways. Not being able to use as legal tender the money of other Presidencies, each was [pg 21] obliged to lock up, to the disadvantage of commerce, large working balances in order to be self-sufficient.³⁶ The very system which imposed the necessity of large balances also rendered relief from other Presidencies less efficacious. For the supply was of necessity in the form of the currency of the Presidency which granted it, and before it could be utilised it had to be re-coined into the currency of the needy Presidency. Besides the loss on re-coinage, such a system obviously involved inconvenience to merchants and embarrassment to the Government.³⁷

³⁵ Cf. Despatch to Bengal dated March 11, 1829.

³⁶ The Accountant-General of Bengal, in a letter to the Calcutta Mint
Committee, dated November 21, 1823 wrote:—

“Par. 32. The amount of the balance must also necessarily depend
upon the state of the currency. If the Madras, Bombay, and
Furrukabad rupees instead of differing in weight and intrinsic
value were coined of one standard weight and value bearing one
inscription and in no way differing, the surplus of one Presidency
would at all times be available for the deficiency of another,
without passing through the Mint, and the balance of India might
be reduced in proportion to the increased availability of currency
for the disbursements of the three Presidencies” (Bombay Financial
Consultations, February 25, 1824).

³⁷ The evil of the system had already made itself felt in Bombay,
where the Government had been obliged by a Proclamation dated
April 9, 1824, to declare the Furrukabad rupee of 1819 standard as
legal tender within its territories on a par with the Bombay
rupee, in order to facilitate the supply operation from Bengal.
Cf. Bombay Financial Consultations, dated April 14, 1824.

At the end of 1833, therefore, the position was that the Court desired to have a uniform currency with a single standard of silver, while the authorities in India wished for a common currency with a bimetallic standard. Notwithstanding these divergent views, the actual state of the currency might have continued as it was without any substantial alteration either way. But the year 1833 saw an important constitutional change in the administrative relations between the three Presidential Governments in India. In that year by an Act of Parliament³⁸ there was set up an Imperial system of administration with a centralisation of all legislative and executive authority over the whole of India. This change in the administrative system, perforce, called forth a change in the prevailing monetary systems. [pg 22] It required local coinages to be replaced by Imperial coinage. In other words, it favoured the cause of a common currency as against that of a mere uniform currency. The authorities in India were not slow to realise the force of events. The Imperial Government set up by Parliament was not content to act the part of the Dewans or agents of the Moghuls, as the British had theretofore done, and did not like that coins should be issued in the name of the defunct Moghul emperors who had ceased to govern. It was anxious to throw off the false garb³⁹ and issue an Imperial coinage in its own name, which being common to the whole of India would convey its common sway. Accordingly, an early opportunity was taken to give effect to this policy. By an Act of the Imperial Government (XVII of 1835) a common currency was introduced for the whole of India, as the sole legal tender. But the Imperial Government went beyond and, as if by way of concession to the Court—for the Court did most vehemently protest against this common currency in so far as it superseded the Sicca rupee⁴⁰—legislated “_that no gold coin shall henceforward be a legal tender of payment in any of the territories of the East India Company_.”⁴¹

That an Imperial Administration should have been by force of necessity led to the establishment of a common currency for the whole of India is quite conceivable. But it is not clear why it should have abrogated the bimetallic system after having maintained it for so long. Indeed, when it is recalled how the authorities had previously set their faces against the destruction of the bimetallic system, and how careful they were not to allow their coinage reforms to disturb it any more violently than they could help, the provision of the Act demonetising gold was a grim surprise. However, for the sudden _volte-face_ displayed therein, the Currency Act (XVII of 1835) will ever remain memorable in the annals of the Indian history. It marked [pg 23] the culminating-point of a long and arduous process of monetary reform and placed India on a silver monometallic basis with a rupee weighing 180 grs. troy and containing 165 grs. fine as the common currency and sole legal tender throughout the country.

³⁸ 3 & 4 Will, IV, c; 85.

³⁹ Cf. the sentiments of Tucker in his _Memorials of Indian
Government_ (ed. by Kaye), 1853, pp. 17–19.

⁴⁰ Cf. their Financial Despatch to India, No. 9, dated July 27, 1836.

⁴¹ Section 9 of Act XVII of 1835.

No piece of British India legislation has led to a greater discontent in later years than this Act XVII of 1835. In so far as the Act abrogated the bimetallic system, it has been viewed with a surprising degree of equanimity. Not all its critics, however, are aware⁴² that what the Act primarily decreed was a substitution of bimetallism by monometallism. The commonly entertained view of the Act seems to be that it replaced a gold standard by a silver standard. But even if the truth were more generally known, it would not justify any hostile attitude towards the measure on that score. For what would have been the consequences to India of the gold discoveries of California and Australia in the middle of the nineteenth century if she had preserved her bimetallic system? It is well known how this increase in the production of gold relatively to that of silver led to a divergence in the mint and the market ratios of the two metals after the year 1850. The under-valuation of silver, though not very great, was great enough to confront the bimetallic countries with a serious situation in which the silver currency, including the small change, was rapidly passing out of circulation. The United States⁴³ was obliged by the law of 1853 to reduce the standard of its small silver coins sufficiently to keep them dollar for dollar below their gold value in order to keep them in circulation. France, Belgium, Switzerland, and Italy, which had a uniform currency based on the bimetallic model of the French with reciprocal legal tender⁴⁴ were faced with [pg 24] similar difficulties. Lest a separatist policy on the part of each nation,⁴⁵ to protect their silver currency and particularly the small change, should disrupt the monetary harmony prevailing among them all, they were compelled to meet in a convention, dated November 20, 1865, which required the parties, since collectively called the Latin Union, to lower, in the order to maintain them in circulation, the silver pieces of 2 francs, 1 franc, 50 centimes and 20 centimes from a standard of 900 ⁄ 1000 fine to 835 ⁄ 1000 and to make them subsidiary coins.⁴⁶ It is true that the Government of India also came in for trouble as a result of this disturbance in the relative [pg 25] value of gold and silver, but that trouble was due to its own silly act.⁴⁷ The currency law of 1835 had not closed the Mints to the free coinage of gold, probably because the seignorage on the coinage of gold was a source of revenue which the Government did not like to forego. But as gold was not legal tender, no gold was brought to the Mint for coinage, and the Government revenue from seignorage fell off. To avoid this loss of revenue the Government began to take steps to encourage the coinage of gold. In the first place, it reduced the seignorage⁴⁸ in 1837 from 2 per cent. to 1 per cent. But even this measure was not sufficient to induce people to bring gold to the Mint, and consequently the revenue from seignorage failed to increase. As a further step in the same direction the Government issued a Proclamation on January 13, 1841, authorising the officers in charge of public treasuries to receive the gold coins at the rate of 1 gold mohur equal to 15 silver rupees. For some time no gold was received, as at the rate prescribed by the Proclamation gold was undervalued.⁴⁹ But the Australian and Californian gold discoveries altered the situation entirely. The gold mohur, which was undervalued at Rs. 15, became overvalued, and the Government, which was at one time eager to receive gold, was alarmed at its influx. By adopting the course it did of declaring gold no longer legal tender, and yet undertaking to receive it in liquidation of Government demands, it laid itself under the disadvantage of being open to be embarrassed with a coin which was of no use and must ordinarily have been paid for above its value. Realising its position, it left aside all considerations of augmenting revenue by increased coinage, and promptly issued on December 25, 1852, another Proclamation withdrawing that of 1841. Whether it would not have been better to have escaped the embarrassment by making gold general legal tender than depriving it of its partial legal-tender power is another matter. But, in so far as India was saved the trials and tribulations undergone by the bimetallic countries to preserve the silver part of their [pg 26] currency, the abrogation of bimetallism was by no means a small advantage. For the measure had the virtue of forearming the country against changes which, though not seen at the time, soon made themselves felt.

⁴² To mention only one, cf. S. V. Doraiswami, _Indian Currency_,
Madras, 1915. _passim_.

⁴³ Laughlin, J. L, _History of Bimetallism_, New York, 1886, pp.
79–83.