"But this relief will be given at the expense of the Indian taxpayer, and with the effect of increasing every debt or fixed payment in India, including debts due by Ryots to money-lenders; while its effect will be materially qualified, so far as the Government are concerned, by the enhancement of the public obligations in India, which have been contracted on a silver basis."

This letter from the Treasury, in reply to the Indian Government's proposals, settled the question for the time, and it was not raised again for six years. The fall of the rupee during these six years was very slight, and is shown in the following figures:

It will thus be seen that between 1878-79 and 1884-85, covering the last two years of Lord Lytton's and the whole of Lord Ripon's administration, the rupee fell only from 19 to 19. But early in 1886 there was a fall in the price of silver; and Lord Dufferin, then Viceroy of India, sent an alarming telegram to the Secretary of State. "Our financial arrangements for meeting interest on loans for frontier railways, defences, and increased military expenditure have been based on the assumption that the rupee would not fall below eighteenpence. Recent fall in the price of silver, and the uncertainty regarding policy of United States of America, cause us grave anxiety. . We earnestly commend the question to the early consideration of her Majesty's Government. Experience seems incontestably

1 The italics are our own. The "nominal readjustment of taxation" referred to in the last portion of the extracts would not have been needed, as the taxation adjusted itself automatically in reference to Land Revenue and other sources of revenue, as stated before.

to have shown that delay seriously aggravates the difficulties of settlement."1

This was followed by a letter, in which Lord Dufferin and the members of his Council stated that the fall in the price of the rupee was due to speculation regarding the repeal or modification of the Bland Act in America; that an attempt should be made to secure a stable relation between the rupee and gold; and that "the present time would appear to be a favourable one for reopening the whole question." The Indian Government did not inquire how far the additional military expenditure referred to in their telegram, and the consequent increase in India's remittances to England, had helped to affect the exchange against India. Nor did they venture to suggest that the plainest remedy for the growing evil was a bold and determined reduction of the Home Charges, which had to be paid in gold.

Lord Randolph Churchill, then Secretary of State for India, forwarded both the telegram and the letter to the Treasury; and, once more, the Lords of the Treasury rejected the proposal of the Indian Government. They referred to the declaration recorded by Mr. Goschen, Mr. Gibbs, and Sir Thomas Seccombe, as the representatives of her Majesty's Government at the International Monetary Conference of 1878, that "the establishment of a fixed ratio between gold and silver was utterly impracticable." And they declared that the proposals of the Indian Government would be a benefit to English officers in India at the cost of the Indian taxpayer, as had been pointed out by Sir Stafford Northcote more than six years before.

"The Treasury find no reason stated in the despatch of the Government of India in the present year which induces them to dissent from the conclusions thus sent for on the authority of Sir Stafford Northcote as to the

1 Telegram dated January 12, 1886.

2 Dated February 6, 1886.

results of any attempt artificially to enhance the gold value of silver."

Whilst it is admitted that some benefit might be derived by the European officers of our Government from the proposed measures, it is shown how injurious would be their effect upon the Indian taxpayer. Since that time the great stimulus which the fall in the value of silver is believed to have given to the export trade of Hindustan, and the great addition which has accrued to the commercial wealth and the industries of the people, reinforce the warning then given against rashly meddling with a condition of things which may well have brought to the people of India more of advantage than of loss. It is impossible to regard this question from the point of view either of the Indian exchequer or of the AngloIndian official without a corresponding regard to the general effect of the fall in the gold price of silver upon the trade and prosperity of the great mass of the population.'

" 1

No further action was taken by the Indian Government for some years after receipt of this reply from the Treasury. But the rupee rapidly fell in value, and it was never inquired how far this fall was caused by the continuous increase in the military expenditure and consequently in the annual drain from India, under the administration of Lord Lansdowne and Lord Elgin. The fall of the rupee during eight years from 1885-86 to 1893-94 is shown in the following figures:

The italics are our

1 Treasury to India Office, dated May 31, 1886.

own.

The Treasury accepted the general belief that the fall of the rupee

was rather to the advantage of Indian manufactures.

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:

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

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