510 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
The curtailment of drawings to save the rate of exchange from being lowered was not an unmitigated good, for it imposed the necessity of a resort to the by no means inexpensive method of sterling borrowings to finance the Home Treasury.* The remittances by drawings fell short of the net disbursements of the Home Treasury in 1893-94 by £6,588,000, which deficit was met by permanent sterling borrowings to the extent of £7,430,000, the interest on which added to the already overheavy burden of the gold payments. Rather than incur such a penalty the Secretary of State gave up the attempt to dominate the market and preferred to follow it. But this letgo policy was not without its cost. The drop in the exchange below 1s. 4d. added to the burden of remittances to the Home Treasury, and also compelled the Government to grant exchange compensation allowance to its European officers, civil and military—an aid which it had so far withheld. The cost to the Government involved by the fall of the rupee below par was quite a considerable sum.†
TABLE XXX
Cost of the Fall of the Rupee
| Years | Loss on Council Bills being sold below par | Loss by Exchange Compensation Allowance | Loss by Increase of Pay of British Troops | Total on each Account in each Year | Total on all Counts for three Years | Col7 |
|---|---|---|---|---|---|---|
| In Rupees | In Sterling at 1s. 4d. | |||||
| 1894-95 ... 1895-96 ... 1896-97 ... | 3,74,15,000 3,05,91,000 1,66,48,000 | 78,02,000 87,18,000 48,95,000 | 37,84,000 49,38,000 44,25,000 | 4,90,01,000 4,42,47,000 2,59,38,000 | Rs. 11,91,86,000 | £ 7,945,733 |
In the midst of such a situation it is no wonder if the faith of the Government in the ultimate stability of the rupee had given way, for we find that in October, 1896, the Financial Member of the Council had personally come to the conclusion that it would be better in the interest of stability to substitute 15d. for 16d. as the par of exchange between the rupee and gold.‡ But the suggestion was dropped as the rupee showed signs of reaching the gold par, which it did in January, 1898, after a period of full five years of depreciation from the established par.
- Evidence of Sir H. Waterfield before the Fowler Committee, Q. 4,332-39.
† Evidence of Hon. A. Arthur before the Fowler Committee. Q. 1,806-7.
‡ Cf. Shirras, Indian Finance and Banking, p. 168.