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The continuous fall of the rupee induced the British Government to depart from the policy it had so long and so justly maintained on behalf of the Indian taxpayer and the Indian industries. The International Conference of Brussels in 1892 produced no change in the situation. It was considered likely that the United States would repeal the clauses of the Sherman Act, which provided for the annual purchase of fifty-four million ounces of silver. The question of the Indian currency was therefore referred to a Committee under the presidency of Lord Herschell, then Lord Chancellor. Lord Herschell's Committee reported in May 1893 in favour of closing the Indian mints, with a proviso that the Indian Government should undertake to issue rupees in exchange for gold at the rate of 16d. per rupee, and should receive British sovereigns in payment of Government dues.

An Act was accordingly passed in India in June 1893, and a notification was issued. A rise in the value of the rupee followed in the succeeding years, as the following figures will show :

Value of the Rupee.

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When the rupee had been brought up nearly to the value suggested by the Herschell Committee, the Government of India asked the Secretary of State, Lord George Hamilton, for measures to fix the rupee at that value.

Lord George Hamilton formed a Committee in 1898, and appointed Sir Henry Fowler as the Chairman. The. object of the Committee was not to discuss the policy of raising the value of the rupee to 16d. That policy had already been accepted and acted upon. Sir Henry Fowler was himself the Secretary of State for India in 1894 and 1895, when the Indian mints remained closed, and the

rupee began to rise. He was not likely to question that policy now. And the instructions of his Committee were not to reopen a discussion on the policy, but to report “whether the object the Government of India have in view can best be attained by the measures which they suggest."1 Nevertheless, a great deal of evidence was recorded by Sir Henry Fowler's Committee as to the expediency, in the interests of the people of India, of fixing the rupee at the enhanced value of 16d. Reference to some portions of the evidence recorded will be made further on. Sir Henry Fowler and his Committee submitted their report in 1899. They recommended that the British sovereign should be declared a legal tender at the rate of is. 4d. per rupee. And they also recommended that the Indian Government, without undertaking to give gold for rupees at that rate, should make a gold reserve, to make it available for foreign remittances when a fall of exchange made such help necessary. An Act, making British sovereigns legal tender in India, was accordingly passed in 1899. There has been a flow of gold since into the Indian treasury and currency reserves. The amount of gold so held in April 1899 was two millions sterling ; by March 1900 it had risen to seven millions. The effect of these measures on the revenues and taxation of India will be discussed in the next chapter.

The evidence recorded by Sir Henry Fowler's Committee in 1898 and 1899 fill nearly six hundred folio pages, double column. Anglo-Indian officials of high distinction and great administrative experience expressed their opinions clearly and emphatically; but one thing they did not do—they never suggested the possibility of • reducing the Home Charges which had created all the difficulty. They accepted these charges as absolutely unavoidable; they were strongly against the open increase of taxation in India; and they therefore recommended

Letter from the Secretary of State to Sir Henry Fowler, dated April 29, 1898.

that the rupee should be maintained at its enhanced value. Sir Antony Macdonnell's evidence fairly represents this opinion; and the following extract will explain his views.

SIR ANTONY MACDONNELL'S EVIDENCE. 5778. Suppose now that the mints were reopened, and the exchange value of the rupee fell to, say, Is., would that at all affect your revenue ?

Of course it would affect us in this way, that more revenue would have to be raised to meet the Home Charges.

5779. You mean by increased taxation ?
Yes.

5780. Will you give us your opinion as to the economic effect of attempting to increase the taxation in India ?

I suppose if the rupee fell to is. you would have, in order to make both ends meet, to raise ten or twelve crores of rupees or thereabouts. I say that it would be impossible to do that without producing such political discontent as would be an extreme cause of danger.

On the other hand, Sir Robert Giffin's evidence fairly represents the opinion of British economists. He condemned an artificial currency for India, and considered no currency good for any country which was not automatic. And he grappled with the difficulty of the Home Charges by boldly suggesting a reduction of those charges.

SIR ROBERT GIFFIN'S EVIDENCE. 10,082. The last point I shall mention with reference • to this question of finance is that there is reason for

suggesting in all the circumstances that the whole question of Indian expenditure should itself be reviewed.

The statements I have seen are confined almost exclusively to the question whether more taxes can be imposed in India or not; but in financial questions, the other side of the matter should be looked at also. It may be the case, and I fear it is the case, that the Imperial Government unfairly charges a great amount of expenditure to India which ought rather to be borne by the empire in general. The army in India is maintained not exclusively for the advantage of the Indian people, but also for the general benefit of the British Empire. It may then be possible to make the deficit in India more manageable than has been represented, and thus avert the supposed necessity of altering the money of India. That is perhaps trenching upon the domain of politics very much, and as we all know there has been a Royal Commission sitting for some time under the chairmanship of Lord Welby, dealing with the question of what ought to be charged to India, and what ought not to be charged in respect of military and other expenditure; but I should like to put very strongly the impression which I have formed that in this matter India substantially is not dealt with in a fair manner, and that something ought to be allowed for the advantage which the empire in general gets from the existence of the European army in India, which is not exclusively for the benefit of the Indian people. I should say that from three millions to four millions sterling is the idea that I have formed as to what ought to be deducted from the permanent charge upon India. This, then, is the main ground-i.e. the want of proof as to deficit—upon which I take the objection to the altera

tion of money in India; and, of course, there remain all • the objections to the nature of that alteration itself.

Only two Indian witnesses were examined, i.e. Mr. Merwanji Rustomji, representing the Exchange Brokers' Association of Bombay, and the present writer, representing Bengal. Both these witnesses were against fixing the value of the rupee at the enhanced value of 16d. Mr. Rustomji recommended the rupee to be fixed at 14d., which had been its approximate value in 1893, before the mints were closed. And the present writer recommended that the value of the rupee should not be artificially. fixed at all. Our readers will pardon our giving some extracts from the evidence of these two witnesses, representing the Indian opinion.

MR. MERWANJI RUSTOMJI'S EVIDENCE. 9746. Why do you advocate is. 2d. as against the IS. 4d. rate ?

I advocate it on the principle that you are going for a gold standard, and I would impress upon you that it is advisable from many points of view. In the first place, take the mill industry, that is an important matter, and take the other trades in which India competes with China.

9747. Your principal reason is that you think that a is. 2d. rate will be better for Indian trade ?

I am taking the Indian mills, and trade carried on in competition with China.

9748. Do you think that the 1s. 2d. rate will materially lessen the competition with China, if China really begins to make railways, and so on?

What I say is, we shall be able to lay down our yarn cheaper than now.

9749. Permanently, or for a time only?

In comparison with the is. 4d. rupee, we shall lay down always cheaper.

MR. ROMESH C. DUTT'S EVIDENCE.

10,643. Did the proposals of the Government of India to arrest the fall of the rupee have the effect of raising its value ?

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