STABILITY OF THE EXCHANGE STANDARD 523
its purchasing-power parity, it is obvious the Committee originated a solution for the simple problem of stabilizing the rupee which involved the much bigger and quite a different problem of deflation or raising the absolute value of the rupee. How was the object to be attained ? The Committee never considered that problem. And why ? Was it because the price of silver had gone up ? May be. But it is doubtful whether the Committee could have believed firmly that the value of silver was going to be permanently so high as to require a modification of the gold par. Anyone who cared to scrutinize the rise in the price of silver could have found that the rise was largely speculative and could not have been permanent.
TABLE XLI
| P | PRICE OF SILVE | ER IN STERLIN | NG (PENCE)* | Col5 |
|---|---|---|---|---|
| Year | Highest | Lowest | Average | Range of Variation |
| 1913 1914 1915 1916 1917 1918 1919 1920 1921 | 293/ 8 273/ 4 27¼ 371/ 8 55 49½ 791/ 8 89½ 433/ 8 | 25 15/ 16 22 1/ 8 22 5/ 16 26 11/ 16 35 11/ 16 42 ½ 47 3/ 4 38 7/ 8 30 5/ 8 | 27 9/ 16 25 5/ 16 23 11/ 16 31 5/ 16 40 7/ 8 47 9/ 16 57 1/ 16 61 7/ 16 37 | 3 7/ 16 5 5/ 8 4 15/ 16 10 7/ 16 19 11/ 16 7 31 3/ 8 50 5/ 8 12 3/ 4 |
But supposing that the rise in the price of silver was not speculative, did it follow that the rupee was appreciated ? The diagnosis of the Committee was an egregious blunder. With the facts laid before the Committee it is difficult to understand how anyone with a mere smattering of the knowledge of price movements could have concluded that because silver had appreciated the rupee had therefore appreciated. On the other hand, what had happened was that the rupee had depreciated in terms of general commodities, including gold and silver. Indeed, the appreciation of silver was a depreciation of the rupee. The following (Table XLII) is conclusive evidence of that fact :—
- From Kirkaldy’s British War Finance, 1921, p. 35. Figures for 1921 are added from the Indian Paper Currency Report.