TOWARDS A GOLD STANDARD 479
hand, rupee drafts on India at the exchange of 16 1/16d. the rupee, and on the other hand, sterling drafts on London at the rate of exchange of 15 3 / 4 d. the rupee. The funds necessary for the transactions were to be kept separate from the ordinary Government balances in “Gold Standard” Offices in London and in India. The London Office was to be kept in funds to meet drafts drawn on it—
(1) by borrowing in gold to the extent of five or ten million sterling;
(2) by the rceipts realized by the sale of drafts on India;
(3) by the receipts realized by the sale of silver bullion in rupee melted down ;* and
(4) when necessary, by further gold borrowing.
The Indian Gold Standard Office was to be kept in funds to meet the drafts drawn on them—
(1) by the receipts realized by the sale of drafts on London ; and
(2) by the coinage when necessary of new rupees from bullion, purchased by the London Gold Standard Office and sent to India.
The principal point of difference between the scheme of currency advocated by the Government of India on the one hand and that put forth by Messrs. Probyn and Lindsay consisted in the fact that the former proposed to establish a gold standard with a gold currency, while the latter proposed to establish a gold standared without a gold currency.
To adjudicate upon the relative merits of a gold standard with a gold currency and a gold standard without a gold currency, the Secretary of State appointed another departmental Committee, under the chairmanship of Sir Henry Fowler. After taking a mass of important evidence, the Committee observed† :—
“50. On this scheme [of Mr. Probyn] we remark that, while bullion may be regarded as the international medium of exchange, there is no precedent for its permanent adoption for purposes of internal currency; nor does it accord with
- Mr. Lindsay contemplated that when the demand for gold drafts on London became so great as to indicate the necessity, the volume of the rupee currency should be contracted by melting down the rupees and selling the silver for gold to be deposited in the London “Gold Standard” Office.
† Report of the Committee appointed to inquire into the Indian Currency, P.P. C 9390 of 1899, p. 15.