BY JOHN MAYNARD KEYNES FELLOW OF KING’S COLLEGE, CAMBRIDGE MACMILLAN AND CO., LIMITED ST. MARTIN’S STREET, LONDON 1913 COPYRIGHT When all but the last of the following chapters were already in type, I was offered a seat on the Royal Commission (1913) on Indian Finance and Currency. If my book had been less far advanced, I should, of course, have delayed publication until the Commission had reported, and my opinions had been more fully formed by the discussions of the Commission and by the eviden

THE PRESENT POSITION OF THE RUPEE 1. On the broad historical facts relating to Indian currency, I do not intend to spend time. It is sufficiently well known that until 1893 the currency of India was on the basis of silver freely minted, the gold value of the rupee fluctuating with the gold value of silver bullion. By the depreciation in the gold value of silver, extending over a long period of years, trade was inconvenienced, and Public Finance, by reason of the large payments which the Governme

With regard to the temporary nature of the effect on exporters, experience has decisively supported theory. The nature of this experience was admirably summed up by Mr. J. B. Brunyate in the Legislative Council (February 25, 1910), speaking in reply to the similar line of argument brought forward by the Bombay mill–owning interests in connexion with the imposition in 1910 of a duty on silver. [1] 4. The criticisms of 1893, therefore, are no longer heard, and the Currency Problems with which we a

4. The essential characteristics of the British monetary system are, therefore, the use of cheques as the principal medium of exchange, and the use of the bank rate for regulating the balance of immediate foreign indebtedness (and hence the flow, by import and export, of gold). 5. The development of foreign monetary systems into their present shapes began in the last quarter of the nineteenth century. At that time London was at the height of her financial supremacy, and her monetary arrangements

The currency notes [22] are in the form of promissory notes of the Government of India payable to the bearer on demand, and are of the denominations Rs. 5, 10, 50, 100, 500, 1000, and 10,000. Thus the lowest note is of the face value of 6s. 8d. They are issued without limit from any Paper Currency office in exchange for rupees or British gold coin, or (on the requisition of the Comptroller–General) for gold bullion. [23] 5. Up to 1910 the following arrangements were in force. Every note was lega

The India Office answered thus: — The establishment of a mint for the coinage of gold in India is the clearest outward sign that can be given of the consummation of the new currency system; and to abandon the proposal now must attract attention and provoke criticism and unrest.... His Lordship is not inclined to abandon the scheme at the stage which it has now reached. The Treasury’s reply was cogent:— My Lords cannot believe that the position of the gold standard in India will be strengthened,

The Secretary of State, therefore, is usually willing to sell telegraphic transfers at a rate 1 / 32 d. per rupee higher than the rate for bills. [52] If the purchaser chooses transfers, the effect to him is that he gets his rupees a fortnight earlier in India and pays for this privilege a sum equal to 5 per cent on the money for a fortnight. The question, whether it is worth the purchaser’s while to pay this extra sum, chiefly depends upon the Indian bank rate, because this governs the amount o

It has been announced that the Gold Standard Reserve is to be allowed to accumulate through coinage profits and interest receipts until it stands at £25,000,000, and that £5,000,000 of this will be held in gold. [61] It is possible that when this figure has been reached, some part of its income may be applied to capital expenditure on railways. This would be a reversion to the policy of 1907–8, since abandoned, when one–half of the profits of coinage was thus diverted. The form in which the Gold

I have seen no evidence for supposing that the general conditions outlined in this quotation do not still hold; but in recent years the Presidency Bank rates have not risen above 9 per cent, and occasions for the operation of the tendencies described above have been rarer. The conditions prevailing in the Indian Money Market in the period immediately preceding 1898 were in many respects very abnormal. I suspect that the rates in the two markets may appear to be more different than they really ar

2. The rates, announced by the three Presidency Banks, are not always identical, but seldom, if ever, differ by more than 1 per cent. Such differences as there are chiefly reflect the differences in date at which occur the various crop movements with which each Presidency is mainly concerned. A wider difference of rate tends to be prevented, not only by the possibility of moving funds from one part of India to another, but also by the fact that the Secretary of State is willing to make his Bills