The Problem of the Rupee, Its Origin and Its Solution

CHAPTER I. *from a Double Standard to a Silver Standard*

*FROM A DOUBLE STANDARD TO A SILVER STANDARD*

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.

Continue reading The Problem of the Rupee, Its Origin and Its Solution free in the Wunder reader →