THE SILVER STANDARD AND THE EVILS OF ITS INSTABILITY 421
strongest interest of the Government to reduce, the resort to the London money market, unavoidable as it became, was somewhat restrained,* with the result that the expansion of extraordinary public works did not proceed at a pace demanded by the needs of the country. The effects of this financial derangement, consequent on the fall of the exchange, were not confined to the Government of India. They were immediately felt by the municipalities and other local bodies who were dependent upon the Government for financial aid. So long as the cash balances were overflowing in the treasury of the Government, “one of the most useful ways” to employ them was found in lending a portion of them to these local institutions. As they had just then been inaugurated under the local self-government policy of Lord Ripon’s regime, and were looked upon only as an experiment, their taxing and borrowing powers were rigidly limited. Consequently, this financial aid from the Central Government by way of temporary advances was a resource of inestimable value to them. When, however, the cash balances of the Central Government began to diminish owing to the continued losses by exchange, these facilities were severely curtailed,† so that the very vitality of these institutions was threatened just at the moment when they needed all help to foster their growth and strengthen their foundations.
Addressing the Secretary of State, the Government of India, in a despatch of February 2, 1886, observed‡:—
“10. We do not hesitate to repeat that the facts set forth in the preceding paragraphs are, from the point of Indian interests, intolerable ; and the evils which we have enumerated do not exhaust the catalogue. Uncertainty regarding the future of silver discourages the investment of capital in India, and we find it impossible to borrow in silver except at an excessive cost.
“On the other hand, the Frontier and Famine Railways which we propose to construct, and the Coast and Frontier
- During the period of falling exchange the distribution of the debt of India was as follows:—
Sterling Debt Rupee Debt
End of 1873-74 ... 41,117,617 66,41,72,900
End of 1898-99 ... 124,268,605 1,12,65,04,340
Indian Currency Committee (1898), Appendix II p. 179
† Cf. Financial Statement, 1876-77, p. 94.
‡ See C. 4868 of 1886, p. 8.